The Matthew Principle is the phenomenon whereby the rich get richer and the poor get poorer. The first part of this (the rich get richer) means that those people who want to live in the most premium suburbs have ever increasing financial capacity to compete for these properties. Since generally the supply is not increasing it means that premium suburbs experience higher capital growth over time than regular suburbs.

If this is true, then the ratio of prices in premium suburbs to regular suburbs would be growing.

I decided to take a look at whether this effect can be seen across 5 suburbs I have lived in since I started high school: Marsfield, St Ives, North Bondi, Dover Heights and Bellevue Hill.

Annual House Price Growth over 2017 to 2026

• Marsfield: 3%
• St Ives: 4%
• North Bondi: 6%
• Dover Heights: 8%
• Bellevue Hill: 10%

The Matthew Principle is evident at least in this particular data set.

Further thoughts on this topic:

When people run out of money the only properties going for big money are the ones wealthy people want … because they have money.

Wealthy people don’t only buy the biggest properties in existence.

Sometimes they need something smaller … say a 2br beach pad for their nephew.

However, no matter what they’re buying, people with wealth don’t buy compromised properties … they don’t need to.

So, if you focus on buying uncompromised properties you will be safer in the dips.