Do educational facilities affect housing price? An empirical study in Hangzhou, China

Abstract

Using data on housing prices and educational facilities of 660 communities in Hangzhou, China, this study develops hedonic price models to quantitatively evaluate the effect of various educational facilities on housing prices. Results show that the spatial econometric model can efficiently eliminate the spatial dependence of housing price, and the traditional hedonic price model overestimates the capitalization rate of educational facilities. Educational facilities have a positive capitalization effect on housing price. Elementary and junior high schools have a significant school district effect. When the education quality of elementary and junior high schools improves by each level, the housing price in this school district increases by 2.020% or 5.443%. The presence of kindergarten schools, high schools, and college institutions improve the surrounding housing prices through accessibility. Adding one kindergarten within 1 km from the community can promote 0.300% of the housing price. The housing price increases by 2.737% or 0.904% when the house is located less than 1 km from the high school or college. Results reveal the importance of educational facilities in the housing market in China. The findings also disclose the additional price that buyers and investors are willing to pay for education quality or accessibility.