Do agglomeration benefits go disproportionately to inner city property owners?

According to agglomeration economics, larger cities are more productive and generate higher and more sustainable incomes per person due to economies of scale, network effects, greater specialisation of individuals, greater diversification across the city as a whole.  Much of the increased wealth as countries develop economically is due to agglomeration benefits.

Hence it is important to look into who benefits from agglomeration.  This will take a series of posts, and in this first part I will present my "Urban Fringe Property Price Growth Model".  I don't know if anyone somewhere else has already formulated this model independently, but it's the model I use to understand my own personal observations of prices in Sydney and other property market... in particular, it answers the question of whether property prices can grow faster than incomes overall?


My model is best explained with the diagram below... for those who hate diagrams, sorry, can't be bothered to explain it in words... perhaps some kind soul could put a translation into the comments...

As the diagram shows, inner and middle ring property prices can potentially grow faster than the income growth of new households being formed in the city fringe (if the hypothesis of my price growth model is correct).  Future blog posts will look further into winners and losers of agglomeration.