New figures from the Real Estate Institute of Victoria (REIV) have revealed a number of areas in regional Victoria are experiencing solid rates of capital growth, but doubts have been cast over the its sustainability.

The figures from the REIV show that in the 12 months to 30 June this year some regional markets in the state saw their rate of capital growth increase by more than 20%.

According to the figures, the median house price in Wangaratta rose to $330,000 from $260,000 over the 12-month period, representing an annual growth rate of 26.9%.

Closer to Melbourne, Geelong recorded growth of 21.5% over the year, pushing its median house price to $580,000. 

In the Ballarat suburb of Canadian, the median house price increased by 19.5% over the year to $350,000 to $293,000.

House prices in the coastal town of Barwon Heads also rose 19.5% over the 12 months to a June median of $811,000, which puts it above Melbourne’s median house price of $706,000.

Yarrawonga, on Victoria’s border, recorded strong capital gains with its median price increasing 17.9% over the year to $336,000, up from $285,000.

While the rates of capital growth may seem attractive, Ben Kinglsey, chief executive officer and founder of property investment advisory firm Empower Wealth, has counselled caution to any investors looking to regional Victoria.

“To me in a lot of those areas there’s nothing there that indicates it’s going to be a long term thing. There’s no real signs of strong economic growth or anything like that,” Kingsley said.  

“In some areas I’d say it’s a story of affordability. People have been priced out of Melbourne, so they're looking to places like Ballarat or Bendigo where they’re an hour to an hour-and-a-half away from the city,” he said.

“Areas like Wangaratta or Yarrawonga are seeing some growth on the back of the Baby Boomer crowd; they’re popular with people looking for a green change as they head into retirement.”

Kingsley did say he could see why some investors may find some regional areas attractive, but that he was currently looking elsewhere.

“We’re not seeing anything in the regional markets really, there’s probably some reasonable rental yields compared to Melbourne but that’s probably about it.

“At the moment we’re not looking around regional Victoria, we’re looking at places interstate.”