Australia's regional housing market continued to outperform the capital cities despite a broad slowdown, Cotality said in a report on Wednesday.

Regional housing values eased by 0.1% in the three months to July, compared with a 2.5% decline across the combined capital cities, per the report. Forty-seven of Australia's 50 largest regional significant urban areas (SUA) had slower growth quarter over quarter, while 22 of them recorded a decline in home values.

"Regional markets have consistently outperformed the capital cities since housing conditions began to soften in late 2025, but even the regional markets are now being impacted by the broader market slowdown," said Gerard Burg, Cotality Australia head of research. "Relative affordability continues to attract buyers to many regional markets and support internal migration from the capitals."

Regional areas of Western Australia and South Australia saw housing values rise 2.1% across both states, the strongest quarterly growth nationally. Port Pirie led South Australia with a quarterly growth of 6.7%, while Kalgoorlie-Boulder and Geraldton recorded the strongest gains in Western Australia at 6.4% and 3.8%, respectively.

Regional New South Wales and Victoria recorded the weakest conditions nationally, reflecting the softer housing markets across Sydney and Melbourne.

Selling conditions weakened during the quarter, with the median time on market increasing in 44 of the Australia's 50 largest regional SUAs.

Regional rental growth eased to 1.1% over the three months to July, down from 1.8% in the previous quarter, Cotality said, adding that the combined capitals recorded a 1.2% increase in rental growth.