Regional Australia has firmly re-established its dominance over the capital cities, with new data revealing a widening gap in property performance as 2026 unfolds. The latest Regional Market Update from Cotality confirms that dwelling values in the regions rose by 3.2 per cent in the three months to January, significantly outpacing the 2.1 per cent growth recorded across the combined capital cities.

This divergence marks a critical shift in market momentum. While capital city growth has cooled—slowing from 3.3 per cent in the previous quarter—regional markets are accelerating, driven by a renewed wave of internal migration and affordability constraints that are pushing buyers beyond the city limits.

Gerard Burg, Cotality’s Head of Research for Australia, notes that the trend is rooted in the financial realities facing Australian households. “Affordability remains a powerful driver of buyer behaviour. With capital city prices still near record highs and stock levels tight, many households are once again looking to regional Australia for greater value and liveability,” Mr. Burg said.

Western Australia and Queensland Lead the Charge

The resurgence is not uniform, with Western Australia emerging as the clear national leader. Regional WA recorded a 6.1 per cent uplift in values over the quarter, driven by mining and lifestyle hubs. Standout performers included Albany, which surged 7.7 per cent, and Kalgoorlie-Boulder, up 7.6 per cent.

Nationally, the inland NSW hub of Wagga Wagga took the crown as the strongest individual performer, posting a remarkable 8.1 per cent rise in dwelling values in just three months.

Queensland also remains a powerhouse, with strong growth in Toowoomba, Bundaberg, and Cairns. In contrast, the momentum in New South Wales (2.5 per cent) and Victoria (2.3 per cent) remains more subdued, with some premium lifestyle markets like Bowral-Mittagong and Batemans Bay recording slight declines as selling conditions in those specific areas soften.

The Rental Crunch Intensifies

While property owners celebrate capital gains, the outlook for tenants in regional Australia is increasingly difficult. Regional rents rose 1.6 per cent in the quarter to January, moving faster than capital city rents.

The long-term data paints a stark picture of the affordability crisis. Over the past five years, regional rents have skyrocketed by 41.9 per cent, vastly outpacing wage growth of just 17.5 per cent over the same period.

“Cost pressures and labour shortages have held back supply across the country, and the stock of regional homes hasn’t expanded fast enough to absorb the added demand from internal migration,” Mr. Burg explained.

With vacancy rates remaining tight—Albany and Devonport led annual rental growth with 16.9 per cent and 11.8 per cent increases respectively—the pressure on regional housing stock shows little sign of easing. As buyers continue to vote with their feet, the “great regional migration” appears to be entering a fierce new phase.