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Suburbs with good schools command a premium price

Posted On Tuesday, 15 May 2018 19:35 Published by
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Globally, people are prepared to pay a premium for properties in suburbs that have good schools, says Gareth Bailey, Pam Golding Properties area principal for Durban Coastal.


“While our North Coast property belt is developing at a relentless rate, fortunately there are sufficient plans in place to deliver quality schools and tertiary institutions to meet the educational needs of these suburbs. The establishment of quality schools and universities in areas such as these will have a significant effect on the strength of these property markets in the long run.”

Bailey says according to the London School of Economics (LSE), a 2006 study in the UK showed that people were prepared to pay substantially more for properties close to good state schools. According to Steve Gibbons, a professor at the LSE, “a primary school one standard deviation above the average in terms of the performance of its pupils … attracts a house price premium of around 3%. This means that a school right at the top of the league tables attracts a premium of around 12% relative to one at the bottom. At the time of the study in 2006, this was equivalent to £21 000.”

A similar picture emerges for Paris, where in 2004, the best schools attracted a premium of up to €17 500. However, this is not just a European story - many studies from the United States and elsewhere produce similar results.

For example, in 2010, the Wall Street Journal reported on the correlation between school performance and home values. When the state of Florida rolled out its new school grading system, home values were directly impacted. The values of homes in neighbourhoods with A-rated schools increased by as much as $10 000 over similar homes in neighbourhoods with B-rated schools. Over a few years, that gap has widened and home values could now vary by anywhere from $50 000 to $300 000 a home, based on the current rating of the school in that neighbourhood.

Says Bailey: “Since quality educational institutions have a significant impact on the strength of property markets, it is important that the new suburbs along our North Coast property belt incorporate sufficient plans to establish these types of institutions.

“Despite significant residential growth, no new schools have been established in our greater uMhlanga area in the last 15 years and our coastline is in desperate need of additional quality school and tertiary education options.

“Fortunately, Tongaat Hulett Developments (THD) is aware of this surging demand and has conducted independent research which has formally identified educational gaps in our area. It has subsequently identified and engaged with educational institution providers on a national basis.”