First-time home buyers are moving to regional areas as housing in capital cities becomes more expensive, a new industry report says.

Population growth in regional areas outstripped, or equalled, capital-city growth in Australia's three largest states in 2005 and 2006, the Housing Industry Association (HIA) said.

A year of strong overseas migration and a rise in Australia's fertility rate was responsible for the national population growth rate increasing from 1.2 per cent to 1.3 per cent in 2006, the HIA said.

Regional population growth and overseas migration helped the housing industry despite slower economic growth, an appreciating domestic currency and record low housing affordability, the association said.

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