Pandemic-era demand for regional homes has cooled, with new data showing rental yields in many coastal and inland towns are now easing after three years of rapid growth.

Markets such as Byron Bay, Geelong and the Sunshine Coast, which experienced strong price gains during 2020–2022, are now seeing softer conditions as more workers return to offices in capital cities. Rising interest rates have also weighed on investors, many of whom chased regional properties during the COVID-19 “escape from the city” trend.

CoreLogic figures show rental yields in several regional hotspots have flattened or declined slightly in the past 12 months. At the same time, price growth has moderated, limiting capital gains for investors who bought in at the peak.

Property analyst Angie Zigomanis said investors were rebalancing.
“During COVID, regional markets looked very attractive because they were affordable and delivering strong rental growth. Now, affordability has deteriorated, rates are higher, and the lifestyle drawcard has softened,” he said.

Agents note that while regional towns continue to attract demand from retirees and sea-changers, investor activity is shifting back to metropolitan markets where infrastructure, jobs and population growth are stronger.