In today’s show Carolyn Boyd from Domain has been looking into the suggestion that buying a property in a good school zone will increase the growth potential of your investment and there’s more tips and advice as well.
Kevin: A question that comes my way quite often is when buyers are buying a property, if they buy in one of those areas that has good schooling, whether or not that actually adds a premium price. There is good evidence that that is in fact the case, and I know that Carolyn Boyd from Domain has been doing a little bit of research on this.
Carolyn: Hi, Kevin.
Kevin: A number of agents I’ve spoken to say that there are people who will pay a premium, but it is very general?
Carolyn: Look, I don’t think it applies to every school zone, but I would say every city in Australia, particularly where schools have zoning – not every school is zoned, but where there is zoning – this would certainly apply as there will be pockets in every single city where families will be prepared to pay more to get into that school zone.
Kevin: As you say, Carolyn, there’s not zoning in every cap city, is there?
Carolyn: No, and you might even find in some capital cities, some schools will be zoned and some won’t, depending on demand for those schools and also depending on the size of the school and the number of classrooms available. But certainly those zoned ones – there’s always a few, isn’t there, Kevin, wherever you live – where people really want to get into that school, particularly primary schools, because I think in general, people often prefer to send their children to a public primary school, and you do see more children go off into those private schools for high school.
It’s interesting. I have asked agents, “What is the premium? What will people pay extra to get into that zone?” The answer is sometimes it’s not a question of what they’ll pay extra; it’s a question of they’ll buy that house or they won’t. If it’s in the zone, they’ll buy it; if it’s out of the zone, they’re not interested.
Kevin: There are, in fact, some cool schools that offer special curriculum, as well, and that, I guess, adds to it. It seems to me as if it’s not very widespread and it’s not something that should be borne in mind if you’re looking at speculating in property, really.
Carolyn: No, and I think the thing is some of the premium prices will already be priced in to those school zones. People are already paying that money to get in, so you’re going along to purchase the house where you’re already competing against those families, and you might find you’re better off not to buy in the zone or potentially pick a school that you think is up and coming.
But that’s hard to pick, isn’t it, because often schools are in demand because of the school leadership at the time. Perhaps that particular principal is doing a great job or people think they’re doing a great job. Perhaps they have had a spike in their NAPLAN results, the testing that year three, five, and seven students do, that is reported on the My School websites, and parents do look at that. It’s a number of factors that make these schools in demand.
Kevin: I guess it’s something that mainly owner-occupiers would take into consideration, not so much investors, because for investors, as you rightly point out, a lot of the premium is already in the property and they’re probably not going to be prepared to pay for it.
Carolyn: That is true. Just one thing from an investment perspective. What it probably does do if you’re buying the type of home that a family would rent, it may mean that it might be a bit easier for you to find tenants within those zones, because many families are quite prepared to go and rent in that zone to get their kids into the school, so that’s something to look at.
But you look at that through the vacancy rates. Is the vacancy rate in this suburb better than the other suburb? You go back to the numbers to have a look at that.
Kevin: Indeed, you do. It always goes back to the numbers, doesn’t it, Carolyn?
Carolyn: It does, yes.
Kevin: Carolyn Boyd there from Domain.com.au. Thanks for your time, Carolyn. Catch up again soon.
Carolyn: Thanks, Kevin.