Top trend: The double dividend from homes in top school areas
Category SA Property Market
Edugration is a well-known phenomenon in SA, with parents changing suburbs and even cities to buy property in the feeder areas for top-rated schools – or in certain estates with their own schools - and usually having to pay a hefty premium to do so.
However, it seems that they are not alone in their quest to give their children the best education, or in the additional costs they are prepared to pay to do so. In the US, continuous research is done to find the most affordable neighbourhoods with the best-ranked schools, while in the UK, new research by Santander Mortgages shows that one in four parents has moved house to be within a desired school catchment area - and paid an average of 11% more than they would have paid for a similar home in a neighbouring suburb.
The report says this premium currently translates into an extra £23 707 (about R400 000 at current exchange rates) on average – but could be as much as £71 539 (about R1,2m) for those living in London’s top school catchment areas.
The survey also found that almost 20% of parents had changed jobs in order to move and get their children into the desired school, and that 15% had settled in an area they didn’t even like for the sake of a good school.
What is more, further research by Lloyds Bank has established that this determination to secure places in certain schools is not restricted to private institutions. Its report says that UK homebuyers with children are currently willing to pay an average of £53 000 more (about R900 000) to live in an area close to a top performing State school.
What is more, it says, the postal districts of six of the 30 top State schools currently command a house price premium in excess of £150 000 (about R2,5m) compared to their surrounding areas.
Even more importantly, though, Lloyds notes that there is good news for those who do make the financial and personal stretch to buy a home close to a top school – and this is that such properties are generally good investments. It found, for example, that property values in the areas around the UK’s top 30 State schools have grown by 26% on average since 2011, compared to an 18% average rise for the UK as a whole.
So does the same go for SA’s top school areas? Can local parents expect a similar dividend from a property in a prime school area? We took a quick look at certain areas prized for their proximity to highly-rated schools to find out:
In Cape Town, the median price of homes in the education hub of Rondebosch, for example, is currently at least 12% higher than that in most neighbouring suburbs – but Deeds Office figures also show that prices here have risen by a whopping 141% over the past five years, compared with increases of 56% in Claremont, 54% in Observatory, and 50% in Kenilworth.
Similarly in Houghton, which is home to several of Johannesburg’s top schools, prices have grown by 44% over the past five years, while those in neighbouring residential areas have generally increased by around 34%.
In KZN, the village of Hilton is recognised as the top “education destination” and its median home price is currently twice that in neighbouring Pietermartizburg. However, prices here have grown by some 60% over the past five years, while those in the capital city have risen by 30%.
And finally in Lynnwood, which is central to most of Pretoria’s most highly-rated schools, the median home price is currently around 32% higher than in neighbouring Menlo Park – but has also risen by 49% over the past five years, while than in Menlo Park has risen 35%.
So the answer would seem to be that yes, SA parents who can manage to pay the premium for a home in a top school feeder area will not only have the satisfaction of being able to place their children in these schools, but will also receive a second payoff, jn the form of a higher return when they decide to sell the property than they would have made on a home elsewhere.
Author: Barry Davies