Australia’s capital cities have overtaken regional markets in dwelling value growth for the first time in nine months, according to new data from Cotality’s August 2025 Regional Market Update.
Over the three months to July, the combined capital city Home Value Index rose 1.8%, just ahead of regional dwelling values, which lifted 1.7%.
Cotality Australia economist Kaytlin Ezzy said the shift reflects capital cities’ heightened sensitivity to changes in interest rates.
“Throughout both the rate tightening and cutting cycles, capital city growth rates have been more responsive to interest rate changes, with the pace of growth showing a noticeable jump following both the February and May cuts,” Ms Ezzy said.
Regional Standouts and Weak Spots
Despite losing the top spot, several regional markets still delivered standout results.
- Lismore (NSW) recorded the strongest quarterly growth among the top 50 regional markets, rising 4.5% to reach a new peak in July. This marks a full recovery from the nearly -18% decline during the 2022 floods and rate hikes.
- Albany (WA) led annual gains with values up 23.1%, also posting the nation’s fastest selling times at just 12 days, and some of the lowest vendor discounting rates at -1.7%.
- Other strong annual performers included Geraldton (20.8%), Mackay (18.2%), and Townsville (16.7%).
At the weaker end of the spectrum, Bowral–Mittagong (NSW) recorded the steepest annual fall, down -2.1%, alongside some of the softest selling conditions, with properties taking 79 days to sell and median vendor discounts at 5.3%.
Sales and Rental Trends
Sales activity is building across Victoria’s regions, with Shepparton–Mooroopna up 32.7%, Ballarat up 29.8%, and Bendigo up 26.4% in annual transaction counts.
Ms Ezzy said the uptick reflects “a turnaround in sentiment, with affordability advantages and capital gains prospects reigniting buyer interest”.
Meanwhile, regional rents continue to outpace the capitals.
Rents in the regions lifted 1.1% over the quarter and 5.6% over the year, compared with 0.9% and 3.0% respectively in the cities.
Albany again stood out, with rents up 15.3% year-on-year, adding an extra $82 per week to the median rental.
Despite affordability pressures, Ms Ezzy said elevated regional migration and tight vacancy rates are keeping rental demand high.
“As of July, just two regional markets—Mildura-Buronga and Nowra–Bomaderry—have seen vacancy rates rise above their pre-COVID decade average”.
