What regional cities should be top of mind for property investors?

Most real estate consumers don't know that strong growth markets abound in Australia. They're missing the best locations for capital gains because most of them, over the past two years, have been outside the major capital cities.

The media's focus on the boom and then the bust in Sydney and Melbourne has resulted in regional Australia being largely overlooked in real estate coverage.

The tendency to report data in a generalised way – a single figure to describe the entire nation – has disguised the reality that prices have been growing in many sub-markets, especially in the smaller capital cities and in key regional centres.

While Sydney has declined, Newcastle has thrived. Alongside Melbourne's downturn have been Geelong's boom and the rise of Ballarat and Bendigo.

The Brisbane market has under-achieved but the Sunshine Coast has risen, Mackay has led the recovery of regional Queensland markets affected by the end of the resources investment boom, and Townsville is poised for recovery on the back of infrastructure investment.

While the Hobart market has passed it peak, Tasmania's second city, Launceston, continues to perform strongly.

Recent research by Hotspotting found 89% of suburbs and towns in regional Victoria had median house prices higher than they were a year earlier. Prices were also up in 85% of regional NSW locations, 65% of regional Queensland centres and almost 100% of regional Tasmania.

Yet most real estate consumers believe price decline has been the norm across the nation. The reality is that there's plenty of growth to be found in worthy locations outside the main cities.

An investment in a regional centre that ticks the key boxes is potentially a win-win-win situation for investors: an affordable entry price, higher rental yields and good potential for capital growth.

Most suburbs in Bendigo have median house prices in the $300,000s, rental yields are typically between 5% and 6% and in the past year median prices have grown 10% in California Gully, 11% in

Heathcote and 6%-7% in a number of other Bendigo suburbs. In Ballarat, most suburbs have recorded double-digit growth in the past 12 months, headed by 23% in Wendouree and 18% in Golden Point. Both Ballarat and Bendigo are attracting buyers (both investors and homeowners) out of Melbourne because they offer affordability, a different lifestyle and a reasonable commute.

Several Launceston suburbs have grown their median prices by more than 15% in the past year.

On the Sunshine Coast, many locations have had growth above 10%, headed by top-end suburbs around Noosa, where some markets have jumped more than 20%.

In Bathurst, in NSW, the median house price has increased 10% in the past year. Nearby Orange has had similar growth. In the upmarket coastal town of Byron Bay, the average annual growth rate over the past decade has been 9.6%, with the median house price now above $1.5 million and typical apartments over $800,000.

Many other centres across regional NSW have had solid growth around 7%-8%, in contrast to the decline in Sydney.

Queanbeyan is thriving as an affordable and well-connected alternative to the suburbs of Canberra.

Adviseable's Kate Hill says investing in a strong regional centre is “a no-brainer” because it offers lower entry prices, higher rental yields and good potential for capital growth. But the regions fly under the radar of most investors.

“Most Australians live in capital cities and they tend to reject the idea of regional investments because they don't know those areas as well as their own backyards,” she says. “There's also a perception of low growth – and it's just not true.

“People are moving to regional cities like Bendigo and Ballarat in Victoria and Newcastle and Wollongong in NSW because there are jobs, affordable housing and a different lifestyle, as well as major spending on infrastructure like hospitals and transport links. There's always good buyer demand in these areas.”

Hill says superior cash flow from higher rental yields is “a pleasant side effect” of investing in strong regional areas.