How Local School Performance Affects Local House Prices

Introduction

Most families choose the location of their new home based on where their children will go to school. As the emphasis on academic performance has become more incisive, home shoppers have become more thoughtful in selecting homes. Is it possible that schools directly affect the value of homes in a neighbourhood? The answer to this question may depend on where you might be considering for your next home.

There is a strong correlation between good state schools and higher valuation of houses, both for primary and secondary schools. As expected, this has implications on opportunities available to children later in life, as well as their social mobility. It is known that poorer families may not have access to quality education.

In a 2017 study carried out by the National Association of Realtors (NAR), it was discovered that 26% of homebuyers considered the quality of schools when searching for a new home. This is not to say that schools are the only determinant of home prices, other factors such as availability of jobs, commute times, housing inventory and safety all play a part in any market. Nevertheless, a good home located in a good school district will attract higher prices, and can be resold at a better price than a similar home located in less-stellar environment.

How Does School Performance Affect Local House Prices?

In deciding how local school performance affect the price of houses, we shall consider two major factors:

Catchment Areas

Of all the factors that have an impact on the price of houses, an interesting one is the school catchment areas. This has always been considered to be the case, but a study undertaken by a leading estate company in 2015 proved that this belief is true. The findings also suggested that the price of properties in close proximity to the best secondary schools cost about 25% more than similar homes in other areas.

New statistics show that the top 10% of primary schools in the UK would increase home prices by about £40,000 while the average price for homes near good primary schools is £18,600. Recent reports also state that around 25% of parents select their homes mainly on the quality of education offered by the local schools. Little wonder why catchment areas for primary and secondary schools rated “Outstanding” by Ofsted accumulate the highest returns.

Since parents want to provide the best education for their children, there is a heightened level of demand for homes close to schools that offer quality education. From basic economics, we understand that when there is an increase in demand when supply is constant, there will be an equivalent increase in price. It is also why competition for houses close to the best local schools could be quite fierce, particularly when these schools sometimes have admission policies that favor those living closest to it.

It is noteworthy that school councils can change catchment areas, so house shoppers should bear this in mind when looking.

Investing In The Future

Deciding catchment areas is solely dependent on the school, whereas investing in the future of the child is the job of the parent.

Many parents take a long-term view where they consider paying premium as a good investment. This is not limited to their children’s education but also from a financial point of view for the future. As stated earlier, houses situated near good schools often retain their value in a fluctuating market, and may sell faster if the market stalls. This is simply because there will always be parents available to pay a premium for their children.

To What Extent Do Schools Make A Difference?

It should not come as a surprise that there are significant differences in academic performances across school districts and among schools in the same district. For instance, standardized test scores from schools in selected districts in Cardiff, UK can illustrate the extent of such differences.

Here is how schools make a difference in determining the price of houses within a district:

School Resources

A few researchers would argue that school resources do not affect students’ academic achievement, but the estimates of the effect of school resources on student performance paints a mixed picture. Several factors that were considered include per pupil expenditure, student-teacher ratios and teachers’ experience and salaries. It has been somewhat proved that in some situations, school resources can make a difference in academic achievement, but there is no strong or systematic relationship between school expenditures and student performance.

Family Characteristics

There is a relationship between student achievement and neighbourhood or family characteristics. For instance, a higher education level of the parents and other adults in the neighborhood can be linked to higher test scores. The presence of both parents in the home also has a positive effect on the academic performance of the child(ren). Other factors which affect academic performance include size of the family, family income, and parents’ occupation.

If family characteristics were the sole factor for higher student achievement, paying a large amount for a property in a school district would make no sense. Moving into the district would not affect the family background of the student.

Peer Group Effect

This is another factor which can go a long way in explaining why families could be willing to pay a premium for houses near quality schools. Researchers call this the peer group effect. This is simply the effect that a student’s classmates or schoolmates have on their academic achievement. There are theories that a pupil’s achievement is strongly linked to the educational background and ambitions of the other students in the school.

The existence of a peer group effect allows children to benefit from the intrinsic capabilities and the family characteristics of the other students in their school. Hence, the makeup of the student body is a factor in the educational process at the primary and secondary levels.

Conclusion

This article has discussed how local school performance affects the prices of local houses. In selecting a location, the question becomes whether you should pick the house or the school first. For a long-term happy move, the location of the school needs to tick the right box as much as the property.