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Australia’s regional property markets could attract increased attention in the years ahead, following changes to negative gearing and capital gains tax announced in the federal budget.
The budget proposed that any purchases made after the announcement would not be able to be negatively geared from 1 July 2027, excluding new builds. The current capital gains tax discount will be replaced with cost-base indexation for assets held longer than 12 months.
Ray White Group Head of Research Vanessa Rader said the changes were designed to encourage investment in new housing supply, but the impact may vary significantly across the country.
“The intent is to shift investor demand toward new housing supply, however the reality, particularly outside capital cities, is more complicated,” Ms Rader said.
“These changes do not remove housing pressure, they shift it.”
According to Ms Rader, regional markets may become increasingly attractive to investors who are focused on rental income rather than tax concessions. She noted that many regional towns continue to offer affordable entry prices and strong rental returns.
Looking beyond the capital cities
While capital city property prices often dominate headlines, a number of regional locations combine relatively low purchase prices with attractive yields.
Ms Rader highlighted examples such as Port Augusta in South Australia, where the median house price is $321,000 and the rental yield is 6.9%, Rockhampton City in Queensland at $383,000 and 7.3%, and Broken Hill in New South Wales at $217,000 and 10.7%.
“For investors seeking properties that can work on a cash flow basis rather than relying on tax concessions, or for first-home buyers and lifestyle seekers priced out of coastal and metropolitan markets, these towns are worth understanding,” she said.
More than an investment opportunity
Ms Rader said regional markets may also appeal to owner-occupiers looking for a lifestyle change.
Many regional centres continue to experience demand for workers in industries such as healthcare, education, agriculture and resources. Combined with lower housing costs, this can create opportunities for buyers willing to consider locations beyond the major capitals.
“The budget changes do not take effect until 2027, and grandfathering applies to established properties already held,” Ms Rader said.
However, she believes the discussion highlights a broader trend.
“Entry at these price points, with yields that can stand on their own merits, represents a different kind of investment story, one that does not depend on policy settings remaining unchanged.”
For both investors and owner-occupiers, regional Australia may be worth a closer look as housing affordability and policy settings continue to evolve.
Considering a move beyond the capital cities? Get in touch to discuss whether a regional property could fit your investment or homeownership goals.
