IT PAYS TO INVEST IN PROPERTY NEAR GOOD SCHOOLS

bannerThe phenomenon of house prices chasing good schools cuts across boundaries as evidenced by news reports around the world.

You know you are on to something big when major publications such as The Independent, CNN, Washington Post, The Telegraph and the Vancouver Sun write about it. A university researcher in the UK has even done a thesis on it. What we are talking about is the phenomenon of good schools affecting the real estate prices in its surrounding.

Their headlines read: “Good school ratings can add premium to home prices”, “Want to beat the property market? Buy near a top school”, “The link between schools and house prices is now an established fact”, “School quality has a mighty influence on neighbourhood home values”, “England’s best schools are pushing up house prices” and “How schools can impact home prices.” Ring a bell?

Screen Shot 2016-05-07 at 2.34.58 PMIn Asia, where education is very highly prized, a similar phenomenon prevails with sometimes extreme examples reported. In Beijing for instance, the ‘school district’ system in which children are enrolled in schools near their homes (quite a universal system), has sparked a rush for houses near schools with good reputation. The matter came to a head when it was reported that an 11-sq m house in a central Beijing hutong near a good school was sold for 460,000 yuan (USD70,610) per sq m. That’s more than 10 times the average price of a house in Beijing which is about 41,586 yuan per sq m.

In general, the price of houses in good school districts is about 20 to 30% higher than the average housing price in Beijing. Parents also see it as an investment as prices of these houses are less susceptible to the ups and downs in the real estate market.[ihc-hide-content ihc_mb_type=”show” ihc_mb_who=”1,2,3,4,5″ ihc_mb_template=”1″ ]

However, things are about to change if the authorities have their way.

To break the link between high house prices and good schools, the relevant authorities in China have been pushing for education reforms, including requiring popular schools to set up branches in different districts and merging the popular schools with other schools. The education ministry has also started a ‘multiple-school-district’ system in Beijing in which children are randomly enrolled in one of several schools near their homes.

The new system would expand the range of primary and middle schools available to city residents by giving parents a list of local options. This, they hope would help rebalance the housing market. How it will turn out is anybody’s guess as news from the ground is that house prices near good schools are still going up in Beijing.

The Malaysian experience

Nearer home in Malaysia, one of the earliest examples of house prices chasing schools is in Subang Jaya, Selangor, where a cluster of international universities and colleges such as Taylor’s College, INTI College and Metropolitan College has caused the surrounding house prices to skyrocket.

“Back in the early 90s, before Taylor’s College, INTI College and Metropolitan College congregated around SS15 in Subang Jaya, a double-storey shop in SS15 area cost about RM190,000 while a double storey terrace house was priced about RM150,000. Today, the same house at SS18/4G is worth RM1 mil! Also, in the same area, many houses have been renovated to include as many rooms as possible in order to accommodate the students. The big motivating factor is that the rooms can fetch rentals of between RM500 and RM1,000 (for a master bedroom with attached bathroom),” reveals Ir. Habibullah Khong Sow Kee, a veteran engineer in the property industry.

Another example is Bandar Baru Nilai which is sited near Kuala Lumpur International Airport. In 1998, the main campus of INTI College Malaysia (ICM) was set up on an 82-acre of land in Putra Nilai while Nilai University College was established on a 105-acre site in Putra Nilai. Both these developments helped stimulate housing developments in Bandar Baru Nilai.

“Had the developer of Perdana College Heights and College Heights Garden Resort at the other side of the KL-Seremban Highway offered a better deal to attract INTI College Malaysia (ICM) to their township in 1998, and established their own College Heights University, the scenario today could be very different,” says Khong.

“Today, one only needs to take a drive to both townships, Bandar Baru Nilai and Perdana College Heights/College Heights Garden Resort, to see the marked difference between how the establishment of good higher institutions of learning can impact its residential development. The property prices between these two townships differed by at least 30% and its marketability differed even more significantly,” Khong, the avid property investor says, adding that another big name institution, Manipal International University ((MIU) took up yet another bigger area for their campus on a 142-acre of land in Putra Nilai in 2011.

Having done some research on the link between house prices and good schools, Khong concludes that besides the brand name of the school, the enrolment numbers is also a crucial factor that investors weigh in when deciding whether to buy near such schools. However, that second factor has yet to be solidly established. Perhaps another thesis for the same Englishman who did the first one on “The link between schools and house prices is now an established fact”?

According to Metro Homes’ director, KL See, the best example in Malaysia is still the Mont’ Kiara expatriate enclave which has a number of well-known international schools. Despite the dampened property market and some oversupply, property prices there have held steady. Other areas in the Klang Valley that have popular international schools include Setia EcoPark, Desa Parkcity, Sierramas and Damansara Heights.

EduCity’s impact

EduCity in Iskandar meanwhile continues to draw a growing number of local and foreign students. Already home to half a dozen different campuses, with universities from the UK, the Netherlands and Singapore among those represented, the educational hub is seeing more uptake of homes nearby. As expected, the housing needs of staff and students are driving demand in the residential segment.

Examples are Ujana Executive Apartment @ East Ledang, a mere 3-minute drive to EduCity’s Newcastle University, Legoland, Kota Iskandar and Puteri Habour. A fully furnished 3-bedroom apartment of 1,320 sq ft is going for about RM800K while rentals can fetch up to RM4,500 per month giving the residence a rental yield of 6%. Ujana is very popular with many foreign university lecturers.

Screen Shot 2016-05-07 at 2.34.20 PMOther examples are East Ledang’s 2-storey semi-dees which were launched at RM750K in 2008 but the price shot up to RM1.2 mil some three years later. The whopping 60% appreciation was due in part to the anticipation of the completion of several nearby catalytic projects including several famous universities in EduCity (completed in 2012). The double-storey terrace houses in nearby Horizon Hills had a similar experience – in 2011, the asking price was RM450K, up 50% from its launch price of RM300K in 2008.

At the height of the property boom in Iskandar in 2011, according to reports, a number of Malaysians and Singaporeans had bought UEM Land’s maiden condo project at Putri Harbour simply because they planned to send their children to the nearby Marlborough College and the medical faculty of Newcastle University.

And the list goes on…

Good schools equals good $$$

A similar story plays out in almost every residential area in the world that is lucky enough to be situated in the vicinity of good schools, colleges or universities. Examples are Singapore and Hong Kong where there is high demand for properties near good primary and secondary schools, notes Metro Homes’ See. Meanwhile in Australia, a good university is held out as the key selling point when selling apartments or condominiums.

In Singapore, Bukit Timah, Pasir Panjang and East Coast areas are highly sought after for their proximity to good schools, according to journalist-turned-property expert Khalil Adis.

Some of the schools include Hwa Chong Institution and Junior College, St. Joseph Institution,

Screen Shot 2016-05-07 at 2.34.22 PMSingapore Chinese Girls’ School, National Junior College, Anglo-Chinese School, Methodist Girls’ School, Raffles Girls’ Primary School, Nanyang Primary School, Nanyang Girls’ High School, Saint Joseph’s Institution and Ngee Ann Polytechnic in Bukit Timah.

In Pasir Panjang, sought-after schools include the National University of Singapore, NUS High School, NUS University Town, School of Science and Technology and Nan Hua High School, while the East Coast boasts of Opera Estate Primary School, St Patrick’s School, CHIJ Katong Convent, Tao Nan School, Dun Man High School, Victoria School, Canadian International School, and Chatsworth International School.

In Hanoi, Vietnam, sales of Gamuda City Vietnam has increased after the establishment of Singapore International School (SIS)’s branch campus there named SIS@ Gamuda Gardens. SIS was also established at Ciputra Hanoi International City together with United Nations International School of Hanoi (UNIS) and Hanoi Academy School. These schools have largely contributed to many expatriates relocating to Ciputra which is developed by pioneer foreign developer, Ciputra from Indonesia.

“Most of the expatriates who have relocated to Hanoi chose to live in Ciputra because of the presence of international schools in the township. Furthermore, the infrastructure and facilities in the township including its security, landscape, greenery and cleanliness are all of international standard,” says Khong. In the 10 years following its launch, Ciputra’s apartment price has more than doubled to USD2,000 per sq m at its peak in 2011, he adds.

“The real estate boom will follow good schools”- may be what investors need to consider now seeing that properties near good schools are generally more immune to the vagaries of the real estate cycle. In other words, they are recession-proof. Having said that, ‘boom’ in this case might merely refer to prices holding out during a downturn or prices that are much higher than average compared to properties further away from the schools.[/ihc-hide-content]

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