Regional buyers are facing a window of opportunity in markets previously saturated with investors, but buying and selling agents say that window may not stay open for long.
Investor activity has pulled back in the weeks since the federal government handed down its housing-focused budget, which included significant changes to negative gearing and the capital gains tax discount on residential investment properties.
During the pandemic, regional housing markets gained unprecedented popularity. PropTrack’s Home Price Index for June revealed that in the past five years, median dwelling prices in the regions rose by 49.4%, making it hard for many locals to keep up.
In comparison, capital city medians increased by 30% over the same period.
Across many regions, city-based investors have created stiff competition for locals with smaller budgets and lower incomes, with agents in some of the hottest regional markets fielding dozens of calls a day by buyer's agents representing interstate or capital city investors.
Regional buyers face a window of opportunity as investors remain cautious, property professionals say. Picture: Getty
Capital city workers, on average earn almost $8000 a year more than their regional counterparts, 2025 ABS data shows.
Slashed tax breaks could finally give regional buyers a break
Investors have traditionally had a strong interest in regional real estate thanks to lower entry prices, higher rental returns, and strong growth potential.
With tax benefits tightening for property investors, many could be funnelling their finances into alternative assets and away from real estate altogether.
PropTrack executive manager of economics, Angus Moore.
Angus Moore, executive manager of economics at REA Group, said that investor activity has been strong in most Australian regions in recent years, but demand has softened.
“We’re yet to see [the budget changes] show up in hard data. The other thing making it hard to disentangle the effects of the budget is that conditions were starting to soften, even before the budget, because of the interest rate hikes. That said, we’d expect to see a pullback in investor demand,” Mr Moore explained, adding that dramatic price falls are unlikely.
“How big that pullback is, remains to be seen. The estimates we have from the budget, and from other modelling work that's been done, suggest that the long term effect on home prices is probably not very large, in the order of a few percent.”
A small window of opportunity
Rather than dramatic price falls, regional buyers could expect more favourable purchasing conditions.
Day on market are predicted to lengthen, giving local buyers more time to arrange finance, complete due diligence and negotiate on price.
Investors have targeted regional cities for their affordability and tight rental markets. Picture: Getty
Buyer’s agent Matt Knight from Precium, who operates along the NSW South Coast, Wollongong and inland regions, said competition for local buyers will undoubtedly slow, but the hesitation might not last long.
“Rentvesting has just become much harder because of the new rules, so young rentvesters are going to struggle. In the short term, young first-home buyers in regional areas will have less competition, and they’ll be able to pick and choose their properties,” he said.
“The market is in a state of confusion because of the changes announced by the federal government. So, there's a buying window right now while the market is softer. Predicting the long term is going to be harder because we don't know whether we’ll have rising or falling interest rates and we don't know if we're going to enter a formal recession or not.”
“I think, first-time buyers who can buy, who want to buy, probably should buy while the market's not running hot,” Mr Knight said, adding that it won’t be long before the market finds its footing.
“Australia still has a love affair with property and owner occupiers will still want their homes.”
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Although the pandemic-driven city exodus has eased, ABS data shows the capitals still recorded a net loss of almost 30,000 residents to the regions through internal migration during 2024 - 25.
This is the reason why prices are unlikely to stumble regionally, according to Mr Moore.
“If the goal of these changes is to solve housing affordability, it's not going to do that. Solving housing affordability has to come back to building more homes,” he said.
“Supply isn’t a short term fix, obviously it takes a long time to build, but it is the only kind of sustainable long term fix for affordability.”
The state of play
Linda Johnson, a NSW representative from the Real Estate Buyers Agent Association of Australia (REBAA) and co-founder of Spring Buyers Agency said the market is officially in a state of transition.
“Regional markets should remain supported, however growth is likely to be more selective than broad-based. Buyer demand is still present, but confidence is now tied closely to affordability, interest rate expectations, rental conditions and clarity around the budget’s policy changes,” she said.
North of the border in Queensland, REBAA spokesperson Melinda Granzien of Precision Property Buyers Agency said the local market is readjusting following a boom.
“While population growth, interstate migration and housing undersupply continue to support the market, buyer sentiment has become noticeably more cautious throughout 2026,” she said.
“Across southeast Queensland and many regional markets, conditions are shifting from a strong seller's market towards a more balanced environment. Buyers are taking longer to make decisions, are undertaking greater due diligence and showing increased sensitivity to price and value.”
Buyer's agents say many regional markets with diverse economies remain resilient. Picture: Getty
In Victoria, REBAA buyer’s agent Matt Scafidi from Abode Advocacy Group said regional real estate has remained comparatively resilient, supported by tight rental markets and attractive rental yields.
“At the coal face, we have observed a noticeable decline in investor enquiry levels and activity since the announcement, particularly for established dwellings. Many investors appear to be adopting a wait-and-see approach while they assess the long-term impact of the proposed reforms.”
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