Australia's regional housing markets continued to outpace capital-city markets in terms of price growth over the past 12 months, according to the latest Regional Market Update from CoreLogic.

Over the year to April, dwelling values in regional markets grew by 13%, significantly higher than the 6.4% gain in capital city values.

Tim Lawless, research director at CoreLogic, said the regional markets’ stronger performance reflects a shift in demand amid the COVID-19 pandemic.

"This can partly be explained by the new popularity of remote and flexible working arrangements, but also increased demand for lifestyle-oriented properties and holiday homes," he said.

Affordability is also a major factor. Over the past month, there was a $247,400 difference between the median value of capital city dwellings and regional dwellings.

Richmond-Tweed in New South Wales rose as the best-performing regional markets over the past year. It registered an annual price appreciation of 21.9%. The median values in the region hit $790,015 for houses and $554,762 for units.

"This region includes high profile beachside destinations such as Byron Bay, Suffolk Park and Lennox Heads as well as popular hinterland villages such a Bangalow," Lawless said.

Lawless believes that regional housing markets will continue to report higher-than-average levels of demand, particularly those markets close enough to capital cities.

Still, while the gains in regional markets spell good news for local homeowners, surging prices could also strain the markets' affordability for would-be buyers.

"Particularly for long-time locals whose incomes are unlikely to be rising at anywhere near the pace of house price appreciation, they may be forced to seek out housing options further afield," Lawless said.