Hi T,
That is actually a loaded question that would take a long time to answer correctly, and it would actually be a different answer for everybody depending on their investment goals. At a high level:
Do I think Kitchener will see the large annual jumps we've enjoyed here over such a sustained term? No... I think it was the perfect storm here (Lake water, cheap entry price, proximity to Miss and Oakville), and still is in terms of demand (not as much in appreciation simply because entry prices have nearly caught up to surrounding 'burbs)
Do I think rental properties have a lower entry price in Kitchener than here? Absolutely - in Milton you are lucky if you can be cash flow positive since the purchase prices are high -- Milton rental investments are good for long term holds (somebody else paying of your mortgage)
What are the vacancy rates and rental inventories like? Milton it is fairly easy to find not only A tenant, but a GOOD tenant. Mattamy Kitchener is a little different in that regard - the tenant pool is a little different because you have fewer of the 'Toronto-commuter' families that prefer the new build rentals, and the competition varies in terms of what's available and who is renting what.
ALSO, with rental properties, you, the landlord has to be accessible. If this is your first rental, having it 35-40 minutes away might be a little bit of a pain. For a seasoned landlord looking at a full portfolio, not an issue there.
If I was looking into a rental property outside of the GTA, I would look at older homes at a lower purchase point, and not afraid of a tenant scuffing the walls or normal wear and tear. I'd also go a touch further between Hamilton and St Catharines, but places in Cambridge and KW could work as well (I'm a control freak with respect to number and analysis, so it would come down to the exact house and details for me). Again, Milton can find you a good number of 'executive' tenants, and that outweighs the cashflow-negative or -even aspect of it in my opinion for first time landlords with long term investment goals. This exists in other areas the further you go outside of the GTA, but in lesser numbers.
Overall it depends on your individual investment goals, the size of your portfolio, personal comfort level with travel and availability, and your comfort level with different types of tenants.
How's that for giving you an answer without giving you an answer?
Hopefully it brough up a few talking points and we'll get more input from others posting as well!