Rural vs Capital City Property: Yields and Growth Performance in 2025

For decades, investing in Australian property meant focusing on capital cities. But in recent years, regional and rural markets have emerged as serious contenders—not just for lifestyle appeal, but for stronger yields and, in many cases, higher capital growth.

Capital Cities: Slowing but Stable

Capital cities still drive much of Australia’s housing market due to population concentration and infrastructure. But price growth in these areas has softened due to affordability pressures, interest rate rises, and market saturation in some suburbs. While cities like Brisbane and Perth are still growing steadily, others like Melbourne and Canberra have either plateaued or declined slightly.

Despite this, capital cities remain desirable for long-term stability and liquidity. However, the gap is closing fast.

Regional Australia: High Yields, Competitive Growth

Rural and regional markets have matured significantly, delivering strong returns for both homeowners and investors. The shift toward remote work, lifestyle changes post-COVID, and improved infrastructure have made regional areas more than just affordable alternatives—they’re now attractive investment destinations in their own right.

Rental Yields: Regional Areas Lead the Way

• Regional Australia: Average rental yields sit around 4.4%, with many areas achieving between 5–6%. Some rural towns in WA and the NT are recording yields as high as 8.5%.

• Capital Cities: Rental yields are lower, averaging 3.5%, with inner-city units often sitting below 3%.

For investors focused on cash flow, regional Australia currently offers significantly better returns.

Price Growth Performance by State

Here's how rural and regional markets have performed versus their capital city counterparts over the past 12 months:

• New South Wales

  • Regional: +3.5%

  • Sydney: +1.7%

• Victoria

  • Regional: -2.6%

  • Melbourne: -3.3%

• Queensland

  • Regional: +10.5%

  • Brisbane: +8.7%

• South Australia

  • Regional: +13.0%

  • Adelaide: +10.8%

• Western Australia

  • Regional: +13.0%

  • Perth: +17.0%

• Tasmania

  • Regional: +3.5%

  • Hobart: +2.6%

• Northern Territory

  • Regional: +0.8%

  • Darwin: +4.1%

• Australian Capital Territory

  • Canberra: -0.5% (no significant rural market)

These figures show that in many states, regional areas are not only holding their own—they’re outperforming capital cities in terms of annual growth.

What’s Driving Regional Strength?

Several factors are fuelling the momentum in regional and rural property markets:

• Affordability: Lower entry prices mean stronger yields and less exposure to lending risks.

• Lifestyle: More buyers are prioritising space, community, and liveability.

• Remote work: Many professionals can now live anywhere without sacrificing income.

• Infrastructure upgrades: Improved transport, broadband, and regional investment are attracting more residents and businesses.

Investor Outlook: Rethinking the Capital City Bias

Investors looking for high growth and stronger yields can no longer afford to overlook regional Australia. While capital cities remain a safe long-term bet, many rural and regional markets now offer a better mix of growth, yield, and value.

A diversified portfolio should include both regional and urban assets—but increasingly, the balance is shifting toward regions with sustainable economic drivers, lifestyle appeal, and population growth.

Final Word

The idea that capital cities always outperform is outdated. Regional Australia is no longer a compromise—it’s a competitive, high-performing segment of the market. For investors and homebuyers alike, now is the time to broaden the map.