When it comes to capital growth, inner-city suburbs have consistently outperformed their regional counterparts. However, the worsening affordability crisis is prompting many prospective property buyers to cast their nets further out into regional areas.

"It seems clear that regional Australia has developed more strings to its bow," says Mark Rodrigues, senior economist for ANZ. "Stronger population growth has fuelled demand for all manner of services, from restaurants, cafes and pubs, to schools, medical centres and banks. At the same time, a burgeoning tourist trade from city dwellers on short weekend breaks has placed further demand on regional infrastructure."

The expanding regional property market
Economists and investors alike are excited about the future of the Australian regional property market, with some property experts forecasting big things for specific regional towns, which may have previously fallen under investors' radars.

Tim Lawless, research director for RP Data, says Queensland's coastal and hinterland townships - such as Sarina (south of Mackay) and Barney Point at Gladstone - offer investor affordability and good capital gains.

"Resource industry workers are looking towards these areas for the lifestyle benefits of being close to the water, while at the same time close enough to commute to work," explains Lawless.

Rodrigues says that while there are certainly examples of regions doing it particularly tough at present, Australia's regional economies are performing very well. "Consistent with the rosy national economic picture, regional Australia has gone from strength to strength in recent years; population growth has accelerated, construction is booming and new jobs are being created at a healthy pace," he says.

Other signs of regional market health include:
• Resilience continues to be tested by a combination of drought, higher interest rates, record oil prices and a strong Australian dollar
• The unemployment rate is the lowest in a generation and continues to fall in more than one-third of areas
• Northeast Victoria's unemployment rate is a very low 2.3%
• South Queensland's unemployment rate is just 2.7%
• The labour market remains strong despite drought conditions

Read the full article and other tips on how to invest in regional properties in the latest issue of Your Mortgage magazine, on sale now.