GCSE successes boost local property prices

House buyers in England pay more for a property in an area close to a top state school, according to research conducted on behalf of Halifax, by Cranfield School of Management.

The research reveals that higher performing schools, i.e. schools with a better pass rate in terms of the percentage of students gaining five or more GCSE passes in grades A* - C, boost local property prices by up to 3% for every 10% improvement in GCSE pass rates.

Seven Major Cities

Academics studied the impact of state funded secondary school performance on house prices in seven major cities in England - Greater London, Birmingham, Bristol, Leeds, Greater Manchester, Liverpool and Newcastle.

Those cities where homebuyers pay the highest premium for 'good' school performance are those where the average pass rates in GCSE examinations are lowest. For example, over the period studied (2001-2007), Bristol had a lower pass rate than the other cities and secured the highest premium. This implies that in English cities where the supply of good schools is lower, the price premium that must be paid for a 'good' school is higher.

A property in a city such as Bristol, where a state school achieved a pass rate of 80%, would therefore be worth - all other things being equal - an additional 12% compared to a house that was in an area in the same city close to a school that had a 40% pass rate.

Residential properties which are located close to high performing state funded secondary schools attract a price premium. This result was found in all of the seven major English cities/conurbations examined.

The extent of the price premium varies between cities:

In Greater London, Liverpool, Birmingham and Newcastle a 10% point differential in GCSE performance produces a 1% point differential in residential properties located close to the high performing school.

In Greater Manchester and Leeds a 10% point differential in GCSE performance produces a 2% point increase in residential properties located close to the high performing school.

In Bristol a 10% point differential in GCSE performance by a specific school produces a 3% point increase in residential properties located close to the high performing school.

Those cities attracting the highest price premia for ‘good' school performance are where the average pass rate in GCSE examinations is the lowest.

Commenting on the research findings Martin Ellis, Halifax Chief Economist, said: "The research is significant in that it confirms the long held suspicion that living next to a good school adds pounds to the value to your home. In a time of falling house prices it's important to be aware of the many factors affecting property value."

Joe Nellis, Professor of International Management Economics and John Glen, Senior Lecturer Economics, at Cranfield, who conducted the research said: "The richness of Halifax's data on house prices allowed us to analyse the impact of school performance on property values in a way we feel has not been possible for researchers previously in the UK."