Regional vs Capital: Where to buy an investment property?
Property investors, both seasoned and novice alike, may have a difficult time deciding where to invest. The location affects the property’s value, potential rental yields, and could impact the overall success of the property investment. It's not an exaggeration to say that finding the right one is vital.
So, the age-old question remains: where should you invest in property in Australia?
Australian real estate: Regional vs Capital
According to the May 2025 Cotality Regional Market Update, quarterly growth in combined regional dwelling values (rising 1.5%) has continued to outperform the capitals (rising only 1.0%). Although the performance gap has narrowed in recent months, there are signs of more growth soon in previously slower regional markets.
If you want to capitalise on growing property values and lower competition, looking at regional markets may be a good idea. However, historically speaking, capital cities have higher property values and more consistent growth over the years compared to regional areas.
In Australia’s 50 largest regional significant urban areas (SUAs), the performance gap has narrowed, closing by a significant margin. The strongest and weakest quarterly performers have a variance difference of 7.3% in April 2025, which is down by almost half since July 2024.
When it comes to rental growth, both combined capitals and regional markets have lost momentum. This may be due to affordability constraints, housing consolidation, and slowing overseas migration hindering bigger annual rental growth. Regional rents have seen a 5.5% increase, which is almost twice the annual increase recorded across combined capital city rents at only 2.9%.
Why should you invest in regional areas?
If you’re looking for high rental yields, regional areas may be worth a look. Properties in regional areas often have higher rental yields than ones in metropolitan areas. The potential for higher returns makes regional suburbs an incredibly attractive option for many investors.
Using the top suburbs for rental yield in Queensland as an example, there's a marked difference in rental yields between suburbs in the Greater Brisbane area compared to those in Regional Queensland. Rental yield in Brisbane City, the top-performing suburb in Greater Brisbane, is 6.5% with a median rental value of $743. Meanwhile, in Collinsville, the suburb with the highest rental yield in Regional Queensland, the rental yield is 12.6%, with a median rental value being $423. The rental yield in Collinsville is almost double the one in Brisbane City.
Even though rental yields are higher in regional areas, the rental values are still lower than those in the metropolitan areas. Always consider this when deciding on the location of your investment property.
With more and more people moving to regional areas because of the high costs in cities, there may be a stronger demand for rental properties. However, regional areas are more prone to longer vacancies.
Why should you invest in metropolitan areas?
In metropolitan areas, there's usually a wider range of investment properties, ranging from residential to commercial to mixed-use developments. Investors have a choice between existing properties and off-the-plan properties for residential property investments, as well. The variety in property options can make it easier to find a property that suits your investment goals best.
When it comes to vacancies and tenant turnover, cities tend to do better than their regional counterparts. Because cities typically have more stable local economies and stronger employment markets, the demand for rental properties is higher, and the vacancy rates or tenant turnovers are much lower. More people are moving to the cities because they bring them closer to job opportunities, universities, entertainment options, and amenities that aren’t available elsewhere. This is why properties near or close to the CBD are worth more and have higher median rents.
Properties in cities also see stronger capital growth. When there’s a rise in demand, property values follow suit. It’s why dwelling prices increase in metropolitan areas more consistently compared to regional areas. But this also means properties in cities are more expensive, making the point of entry for investors much higher.
Where is the best place to buy investment property in Australia?
Ultimately, it depends on what you want out of your property investment. Both regional and metropolitan areas offer advantages and disadvantages. Assess your investment goals and financial situation carefully to figure out which location aligns best with your needs.
Properties in metropolitan areas or capital cities may have a higher price tag, but they also show consistent capital growth and have steady rental demand. Meanwhile, properties in regional areas are more affordable but may not see as much growth as ones in cities.
Once you’ve chosen where to invest, it’s now a question of how you’re going to finance your investment. At loans.com.au, we offer a range of investment home loans with competitive rates and useful features, helping investors buy their properties sooner. For more information, get in touch with our friendly lending specialists today by calling 13 10 90. Or get a head start on your investment property journey by applying for a loan online today!
Find out in under 2 minutes if you qualify for one of our low rate home loans.
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