Abstract
This paper examines the relationship between state-funded secondary school performance and local residential property values in seven major English cities. When choosing which secondary school they wish their children to attend, parents will be aware of the school?s performance in Key Stage 3, GCSE and A- level examinations. We suggest that GCSE examination results will be the measure of school performance that parental choice will be most closely correlated with. Therefore, secondary schools with good GCSE examination results will be ?oversubscribed? in that more students will wish to attend these schools than there are places available. Schools will then have to develop mechanisms for rationing the available places - central to rationing strategies in English schools at the moment is geographical proximity of the family home to the school of choice. Parents will thus have a strong incentive to purchase houses in the ?catchment? area of high performing schools. Our results suggest that this is the case, with high performing schools stimulating a price premium in local residential property markets of between 1% and 3% for each additional 10% point improvement in the pass rate in GCSE examinations.
Highlights
Stephen Gibbons and Stephen Machin (2008) state that anecdotal evidence, media reports, and even dinner party discussions lend credence to the claim that good schools raise local house prices
A set of ACORN ratings dummy variables was included to allow for variability in neighbourhood characteristics while annual time dummy variables were included to allow for the influence of inflationary effects over the period 2001-2007 not associated with the physical, neighbourhood or environmental characteristics of the properties in our dataset
Summary and Conclusions The results in this study provide robust evidence that the differences in state-funded secondary school performance in GCSE examinations is consistently capitalised into residential property prices; ie., residential properties which are located proximate to high performing state-funded secondary schools attract a price premium
Summary
Stephen Gibbons and Stephen Machin (2008) state that anecdotal evidence, media reports, and even dinner party discussions lend credence to the claim that good schools raise local house prices. The structure of the paper is as follows: the section provides a review of the literature on the capitalisation of school performance into residential property prices, focusing on the so-called hedonic approach to measurement (the methodology adopted in this study). The study reported in this paper seeks to make a contribution to this expanding area of research This contribution can be gauged in a number of ways: we employ (a) a data set which has exceptional breadth and depth; (b) we explicitly incorporate neighbourhood characteristics effects, thereby addressing the endogeneity issue common to studies of this kind; (c) our ability to disaggregate the data set across different metropolitan areas allows for housing market segmentation and (d) the inter-temporal nature of our data set allows us to model the impact of changes in average.
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