The median house price in Moyne and Corangamite shires has also increased by 112 per cent and 122 per cent respectively.

Real Estate Institute of Victoria figures found Warrnambool's median house price jumped from $333,000 in 2016-17 to $500,000 in 2020-21.

This figure rose again in 2021-22 to a median house price of $605,000, an increase of 21 per cent.

In Corangamite Shire the median house price five years ago was $191,000.

This rose to $346,000 in 2020-21 and $425,000 in 2021-22 - an almost 23 per cent rise on the previous year.

Moyne Shire homes rose from $320,000 in 2016-17 to $500,000 in 2020-21. In 2021-22 it increased by 36 per cent to $680,000.

REIV president Richard Simpson said despite the massive growth in the south-west it still represented excellent value, compared to Melbourne where the median house price was more than $1 million.

"It's a big saving if you want to buy something in regional Victoria," Mr Simpson said.

He said regional Victoria was "bucking the trend" with its median house price rising by 1.3 per cent, compared with Melbourne's, which had fallen 2.9 per cent in the June quarter.

Mr Simpson said much of the huge growth in regional prices had occurred in the past two-to-three years during the pandemic when people reassessed their lives.

This reflection and an ability to work from home sparked a tree-change for many workers, including metro-based employees who could work flexibly.

He said the current labour shortages and low unemployment rates meant workers could continue to work remotely or negotiate flexible arrangements.

Despite many organisations having a directive to return to the office this year, he said many would continue to work remotely.

He said with high labour shortages and low unemployment rates, employees held the upper hand.

Employers needed to be "very flexible" and continue to offer work from home arrangements, with south-west tree-changers likely to remain in the region, he said.

"I don't think that's going to change until unemployment starts to creep back up again, I think, where employers can have a bit more say where their employees work."

He said the demand for housing would continue with a lack of supply putting more pressure on regional house prices and rentals.

"There hasn't been a lot of new stock that's been built in regional Victoria and I don't see that changing too much in the future given the difficulty in construction we're going through at the moment," Mr Simpson said.

He expects the south-west region's growth rate to "be a bit more subdued" in the coming years.

"It (Warrnambool's) went up $105,000 from the previous year which is 21 per cent. I don't think it's going to be another 21 per cent increase - that's not sustainable," Mr Simpson said.

"I think we're going to see rates of growth return to a more normal growth pattern of three-to-five per cent per year once it settles down a bit."

Mr Simpson said rising interest rates and cost of living would also contribute to the region's rate of growth "flattening", as people had less money.

Prices would stabilise as the interest rate rising cycle ended which he said banks were predicting would be in March 2023.

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