I talk about a lot of different things in the property development space, and there's one thing I know to be true.
One of the biggest risks is not whether a site is developable, or whether it's profitable, or even how well you run the project. One of the biggest risks is whether or not you can sell the finished product at enough of a premium to justify the time, effort and risk of the development project.
Sounds simple, right? So what does this have to do with developing in capital cities vs regional areas?
In order to break this down, I need to educate you on one of the finer points of property development. At its core, the choice between capital city and regional development is not about geography. It is about market depth, risk management, funding realities, and exit certainty.
I'm not about putting hard and fast rules in place, because opportunities can always be found if you look hard enough. Instead, I'm looking for the areas where my development has the greatest chance of success. And in a nutshell, the greatest opportunity is in areas of high demand and strong population growth, because that creates natural pressure on prices.
So I'm not going to say that if you go to a regional area, a development deal can't work. But I am going to look at the ins and outs of the two types of market, so you can make an informed decision. I'm also going to address one of the most common reasons property developers think going regional is the best option for them. Let's get into it!
Market Depth & Demand
Capital cities benefit from deep and diversified demand. Population growth is typically driven by employment concentration, international migration, education hubs, and large-scale infrastructure investment. For developers, this depth translates into liquidity. There are more buyers, more tenants, and more active participants across different price points.
This doesn’t mean capital city projects are immune to risk. Demand can be highly segmented. A poorly designed product, the wrong dwelling mix, or over-supply in a particular submarket can quickly undermine an otherwise sound project. However, when mistakes are made, the market often provides a second chance through resale, rental, or reconfiguration strategies.
Regional markets, by contrast, are thinner and more concentrated. Demand is often linked to a small number of drivers such as a dominant local industry, lifestyle migration trends, or a single major infrastructure project. When these drivers are strong, regional markets can outperform capital cities dramatically. When they weaken, demand can dry up just as quickly.
For developers, this can mean you're not just developing property - you are effectively placing a bet on local economic conditions remaining favourable long enough to complete and exit the project.
If, for example, you're building a home for a young family when the area demographic is most empty nesters, then you've built the wrong product. Bottom line, if there's not enough empty nesters, your product will struggle to sell.
But in a high population area, there will be more of those empty nesters. Even if there's not, you'll find a family that will take it on because they might be wanting something at a discount. Problem is, selling at a discount won't give you your anticipated profits,
The good news is that it will get you out of the deal and hopefully keep you in the black. If you can't sell because there's no demand, you may be stuck long term with a dud. Holding costs hurt!
Site Acquisition Costs
For budding property developers, the temptation is to go to regional or outer metropolitan areas because of their lack of perceived purchasing power. And look, I get it. Capital city land prices are significantly higher, particularly in established suburbs with strong amenity and transport access. Competition for sites is intense, often involving other developers, institutional buyers, and owner-occupiers.
This puts intense pressure on site prices. It can be hard to justify paying prices that appear aggressive on the surface, and finding sites that stack gets a lot harder.
Regional areas offer a different equation. Land is generally cheaper and competition is lower. However, cheap land is not the same as good land. The most common equation is that if you buy cheap, you'll have to sell cheap, and selling cheap may not be enough to cover the costs of the project.
I know I say it a lot, but it's particularly relevant when you're looking at finding a property development deal in a regional area because of your personal financial solution: don't let your lack of resources stop you from being resourceful.
In my Property Development Formula course I talk a lot about ways to get creative when it comes to funding a deal. I love no and low money down solutions! Invest your time and effort in finding property development deals that work, rather than limiting yourself only to deals you can afford.
Project Costs
Another factor that can really hurt when comparing capital cities and regional areas, though, is costs for a typical small project. Development costs for a 1 into 2 or duplex, for example, are going to be very similar in both regional and city areas. This risk is often underestimated.
Capital cities generally offer a larger pool of builders, subcontractors, and suppliers. While build costs may be higher, competition provides options. If a builder fails or pricing becomes unviable, alternatives are usually available.
Regional areas often have limited builder capacity. Mobilisation costs can be significant, trades may be scarce, and pricing is less competitive. If a preferred builder becomes unavailable, there may be few realistic substitutes. Delays in construction can also have a disproportionate impact on feasibility due to slower sales or leasing markets.
Funding and Valuation Realities
From a lender’s perspective, capital city projects are easier to assess. There are more comparable sales, more active markets, and greater confidence in exit liquidity. As a result, banks are typically more comfortable providing higher leverage, assuming other fundamentals stack up.
Regional projects are often treated more conservatively. Valuers may discount end values due to limited sales evidence, and lenders may require higher pre-sales, lower loan-to-value ratios, or additional equity buffers. In some locations, certain lenders will not participate at all.
This does not make regional development unfinanceable (is that even a word?), but it does mean that structure, capital reserves, and lender selection become far more important.
Final Thoughts
The debate between capital city and regional property development is often framed as an either/or choice where both sides have equal merit. In reality, capital cities offer more demand, liquidity, and funding options.
Regional areas may offer affordability, but as I've already said, I don't believe that's a valid reason for making that choice, if it leads you to a situation where the resale prices don't justify the development costs. Yes, you can make money in regional markets if you find the right deal, but that's the only reason to go regional - not because it's all you believe you can afford.
Pull out your shouting voice and repeat after me: "Show Me The Money!!" Apologies to Tom Cruise, but I'll say it again - for me, capital cities have the depth of market which gives you the best chance of making money.
One of the biggest risks is not whether a site is developable, or whether it's profitable, or even how well you run the project. One of the biggest risks is whether or not you can sell the finished product at enough of a premium to justify the time, effort and risk of the development project.
Sounds simple, right? So what does this have to do with developing in capital cities vs regional areas?
In order to break this down, I need to educate you on one of the finer points of property development. At its core, the choice between capital city and regional development is not about geography. It is about market depth, risk management, funding realities, and exit certainty.
I'm not about putting hard and fast rules in place, because opportunities can always be found if you look hard enough. Instead, I'm looking for the areas where my development has the greatest chance of success. And in a nutshell, the greatest opportunity is in areas of high demand and strong population growth, because that creates natural pressure on prices.
So I'm not going to say that if you go to a regional area, a development deal can't work. But I am going to look at the ins and outs of the two types of market, so you can make an informed decision. I'm also going to address one of the most common reasons property developers think going regional is the best option for them. Let's get into it!
Market Depth & Demand
Capital cities benefit from deep and diversified demand. Population growth is typically driven by employment concentration, international migration, education hubs, and large-scale infrastructure investment. For developers, this depth translates into liquidity. There are more buyers, more tenants, and more active participants across different price points.This doesn’t mean capital city projects are immune to risk. Demand can be highly segmented. A poorly designed product, the wrong dwelling mix, or over-supply in a particular submarket can quickly undermine an otherwise sound project. However, when mistakes are made, the market often provides a second chance through resale, rental, or reconfiguration strategies.
Regional markets, by contrast, are thinner and more concentrated. Demand is often linked to a small number of drivers such as a dominant local industry, lifestyle migration trends, or a single major infrastructure project. When these drivers are strong, regional markets can outperform capital cities dramatically. When they weaken, demand can dry up just as quickly.
For developers, this can mean you're not just developing property - you are effectively placing a bet on local economic conditions remaining favourable long enough to complete and exit the project.
If, for example, you're building a home for a young family when the area demographic is most empty nesters, then you've built the wrong product. Bottom line, if there's not enough empty nesters, your product will struggle to sell.
But in a high population area, there will be more of those empty nesters. Even if there's not, you'll find a family that will take it on because they might be wanting something at a discount. Problem is, selling at a discount won't give you your anticipated profits,
The good news is that it will get you out of the deal and hopefully keep you in the black. If you can't sell because there's no demand, you may be stuck long term with a dud. Holding costs hurt!
Site Acquisition Costs
For budding property developers, the temptation is to go to regional or outer metropolitan areas because of their lack of perceived purchasing power. And look, I get it. Capital city land prices are significantly higher, particularly in established suburbs with strong amenity and transport access. Competition for sites is intense, often involving other developers, institutional buyers, and owner-occupiers.
This puts intense pressure on site prices. It can be hard to justify paying prices that appear aggressive on the surface, and finding sites that stack gets a lot harder.
Regional areas offer a different equation. Land is generally cheaper and competition is lower. However, cheap land is not the same as good land. The most common equation is that if you buy cheap, you'll have to sell cheap, and selling cheap may not be enough to cover the costs of the project.
I know I say it a lot, but it's particularly relevant when you're looking at finding a property development deal in a regional area because of your personal financial solution: don't let your lack of resources stop you from being resourceful.
In my Property Development Formula course I talk a lot about ways to get creative when it comes to funding a deal. I love no and low money down solutions! Invest your time and effort in finding property development deals that work, rather than limiting yourself only to deals you can afford.
Project Costs
Another factor that can really hurt when comparing capital cities and regional areas, though, is costs for a typical small project. Development costs for a 1 into 2 or duplex, for example, are going to be very similar in both regional and city areas. This risk is often underestimated.Capital cities generally offer a larger pool of builders, subcontractors, and suppliers. While build costs may be higher, competition provides options. If a builder fails or pricing becomes unviable, alternatives are usually available.
Regional areas often have limited builder capacity. Mobilisation costs can be significant, trades may be scarce, and pricing is less competitive. If a preferred builder becomes unavailable, there may be few realistic substitutes. Delays in construction can also have a disproportionate impact on feasibility due to slower sales or leasing markets.
Funding and Valuation Realities
From a lender’s perspective, capital city projects are easier to assess. There are more comparable sales, more active markets, and greater confidence in exit liquidity. As a result, banks are typically more comfortable providing higher leverage, assuming other fundamentals stack up.
Regional projects are often treated more conservatively. Valuers may discount end values due to limited sales evidence, and lenders may require higher pre-sales, lower loan-to-value ratios, or additional equity buffers. In some locations, certain lenders will not participate at all.
This does not make regional development unfinanceable (is that even a word?), but it does mean that structure, capital reserves, and lender selection become far more important.
Final Thoughts
The debate between capital city and regional property development is often framed as an either/or choice where both sides have equal merit. In reality, capital cities offer more demand, liquidity, and funding options.
Regional areas may offer affordability, but as I've already said, I don't believe that's a valid reason for making that choice, if it leads you to a situation where the resale prices don't justify the development costs. Yes, you can make money in regional markets if you find the right deal, but that's the only reason to go regional - not because it's all you believe you can afford.
Pull out your shouting voice and repeat after me: "Show Me The Money!!" Apologies to Tom Cruise, but I'll say it again - for me, capital cities have the depth of market which gives you the best chance of making money.
