£61,000 premium to be close to a popular school

£61,000 premium to be close to a popular school

The premium paid for a house near a top primary school in London and the south-east is £61,000, equivalent to a quarter of the price of the average house in the region, research released today suggests.

A move of 10 percentage points up the league tables of schools can boost house prices in the immediate neighbourhood of an improving school by 3%, say academics Steve Gibbons and Steve Machin in the latest Economic Journal.

The authors detect a "herd" mentality where parents tend to judge a primary school according to how over-subscribed it is, rather than how good it actually is.

"Parents can expect a move from an average dwelling outside a weak school, to one outside a top over-subscribed school, to cost around £61,000," says the research, adding that a similar move to an under-subscribed, but still good school would cost around £49,000.

The report also says that only top schools enhance property prices in their immediate environs. Schools of only average quality can in fact depress prices because schools are not considered by most people to be valuable local amenities because of factors such as school-run traffic, congestion and playground noise.

The price premium the authors observe for the most popular primaries drops rapidly the further a house is from that school. They estimate the premium drops 8.4% per hundred metres from the school.

The study, which looks at data covering five years to 2004, says that.....continued below

Advertisement starts

---

---

Advertisement ends

the features of the English school admissions system add to the difficulty facing parents over their choice of school. Because catchment areas are vaguely defined, and work on a "nearest-in-first-in" policy, there can be a great deal of uncertainty about which residential locations are best.

The problem is compounded because schools have a fairly fixed number of places, but parents cannot know each year if a school will be over- or under-subscribed. As parents face confusing information about school quality, they often tend to use popularity as a sign of quality, says the authors.

Meanwhile, figures out yesterday from the British Bankers' Association pointed to a slowdown in new mortgage lending, suggesting that the upturn in prices in recent months, particularly in London, may be deterring buyers again.

The BBA said seasonally adjusted underlying mortgage lending rose by £4.4bn last month compared with £4.6bn in January and an 18-month high of £5.3bn in December. The number of approvals for new mortgages rose to 57,500 from 45,000 in February. But that figure is not seasonally adjusted.

"While the February mortgage lending and approval data are relatively healthy, there are hints that housing market activity could be starting to lose momentum after several months of improvement," said Howard Archer, economist at consultants Global Insight. House prices have risen for the fourth consecutive month, thanks to a resurgent London market.

Guardian Unlimited © Guardian Newspapers Limited 2006