Australia’s rich keep getting a bigger share of the income pie, so what does this mean for property?

The gap between the haves and the have nots is widening.

New research has found that Sydney and Melbourne have more than their fair share of the top one per cent of income earners – at 11.9 per and 10 per cent respectively – well above the national average.

Our other capital cities also scored highly when it came to where our richest citizens choose to live.

What does it all mean?

Australia is a country where the vast majority of our population chooses to live in one our eight capital cities.

In fact, according to the latest Census, nearly 90 per cent of our population live in urban areas.

Not only that, the most well-to-do tend to reside as close to the central city as possible because, well, they can afford to do so.

And it's no coincidence that the rich do not commute.

The poor, on the other hand, have no choice in the matter and are flung out to the city’s outer edges.

This is borne out in official statistics which show that median personal income is rising in the well-to-do yuppie suburbs of the inner-city.

Lots of double-income-no-kids and professional-type households have the effect of injecting loads of disposable income into a local area.

This is very different to the outer suburbs where incomes are not rising.

This phenomenon is common around the world, with lower income families generally living on the outskirts of cities or in regional locations.

What does it mean for property?

This reinforces the reasons why in the long term, well located properties in the inner and middle ring suburbs of our capital cities will grow in value faster than elsewhere.

The richest members of our society tend to congregate within the same suburbs in every capital city.

Depending on the location, that could be anywhere from five to 20 kilometres from the CBD or in the desirable suburbs that have enviable views of some kind.

So, it stands to reason, that if the wealthy are all keen on living in the same suburbs, and have plenty of money to pay for property, then prices correspondingly rise.

Clearly, one of the factors is that they have the financial means to pay more.

Plus, they are often emotionally driven to live in a prestigious location and are prepared to pay to do so.

My property investment strategy has long been to buy only investment grade properties that have the potential to out-perform the averages over the long-term.

One of the attributes of these properties is location, specifically being located in areas where high income earners have a strong desire to live as well as in gentrifying suburbs where the incomes of the locals are rising.

The strong demand in these locations where there is a limited supply of properties, means that prices grow more quickly.

Ditto, bigger bank accounts means more money to secure a property in a prestigious location.

However, on a city’s fringe or in regional locations where wages are generally lower and wages growth is limited, potential buyers don’t have the cash to drive up prices to the same degree.

So, yes, the rich are getting richer, and they are gathering en masse in similar areas.

And these are the locations strategic investors also own their properties.

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.