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University of Sydney researchers concluded owning property makes someone rich more than salary


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Those earning $150,000 a year are no longer considered to be among the richest Australians – unless they have wealthy parents.

University of Sydney researchers have come up with five new classes – investors, home owners, borrowers, renters, and the homeless.

Those who make their money from investment properties are now considered to be Australia’s wealthiest class – with the researchers concluding the real estate you own is now more important than the size of your salary.

Having rich parents helps too especially in Sydney, the world’s second most expensive property market in the world for workers after Hong Kong.

Those earning $150,000 a year are no longer considered the richest class of people in Australia (pictured is a stock image)

‘In short, social mobility is increasingly associated with the asset position of parents not only for the super-rich but also for ordinary households,’ the paper on inequality said.

Australia’s new class structure

1. INVESTORS: These landlords derive income from renting out their investment properties and claim tax breaks on their capital gains

2. OUTRIGHT HOME OWNERS: Have paid off their mortgage, and own investment properties too

3. HOME BORROWERS: Are paying off a mortgage 

4. RENTERS: Considered part of the ‘churners’ class and are often on welfare

5. HOMELESS: These people have no assets, wages or welfare from the state 

During the past two decades, wages have grown by an annual pace of 3.1 per cent compared with 7.55 per cent for house prices in Sydney.

Making matters worse, Australian pay increases have been at below-average levels for the past six years.

‘This has led to a steady increase in the average house price to income ratio – with dwelling prices at nine times the median household income – and an unprecedented rise in household debt, with many more people continuing to hold mortgage debt into old age,’ it said.

Sydney’s median house price of $877,220 is more than 10 times an average Australian, full-time salary of $85,000.

This means someone earning $150,000 a year would struggle to pay off a typical, suburban home in the western suburbs without being in mortgage stress, where they are spending a third or more of their pay on repayments.

Australia’s household debt-to-income ratio of 190 per cent is also the second highest in the world after Switzerland.

University of Sydney researchers have concluded the amount of property someone owns made them wealthy - more so than the size of their salary. Having rich parents helps too especially in Sydney, the world's second most expensive property market in the world for workers after Hong Kong

University of Sydney researchers have concluded the amount of property someone owns made them wealthy – more so than the size of their salary. Having rich parents helps too especially in Sydney, the world’s second most expensive property market in the world for workers after Hong Kong

University of Sydney social science professors Lisa Adkins, Melinda Cooper and Martijn Konings broke up society into five classes, with property-owning landlords at the top.

‘At the upper end of the scale, housing market investors are likely to be less dependent on income from labour and more dependent on income from capital,’ they said.

‘While most wage earners have experienced stagnant income growth over the past few decades, the incomes of the wealthiest investors have experienced a phenomenal inflationary upsurge of housing assets in general.’

They were higher on the class ladder than those who owned their home outright.

Home owners with a mortgage were in the middle.

Renters, especially those on welfare, were considered to be the second poorest after the homeless.

The researchers blamed negative gearing tax breaks for fuelling soaring house and apartment prices.

Sydney's median house price of $877,220 is more than 10 times an average Australian, full-time salary of $85,000 - with property values growing at double the pace of wages since 1999 (pictured is a house at Parramatta in the western suburbs on sale for $889,000)

Sydney’s median house price of $877,220 is more than 10 times an average Australian, full-time salary of $85,000 – with property values growing at double the pace of wages since 1999 (pictured is a house at Parramatta in the western suburbs on sale for $889,000)

‘Thus, in a context in which government policy is otherwise actively seeking to moderate wages, negative gearing has allowed high earners and investors to exempt themselves from progressive taxation – an innovation that might go some way to explaining the phenomenal surge in earnings at the upper end of the income scale,’ they said. 

Labor was defeated at the May federal election, consigning it to a third consecutive term in Opposition, after it vowed to scrap negative gearing for existing homes from January 2020 and halve the capital gains tax discount to 25 per cent.

The researchers cited data from American housing affordability think tank Demographia, which found Sydney was last year the second most unaffordable city in the world after Hong Kong, when wages were factored in.

Sydney was even more expensive than Vancouver in Canada and the Californian Silicon Valley city of San Jose.

Melbourne was considered even more unaffordable than Los Angeles, Honolulu, San Francisco, Auckland and London.

Read more at DailyMail.co.uk


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