Labour sets sights on private school VAT tax relief which could widen the property price gap

Living near ‘outstanding’ rated schools commands a house price premium – both compared to lesser rated schools and the surrounding area – that’s according to the latest analysis from Yopa, the full-service estate agents.

Yopa analysed current housing market data for almost 18,500 schools up and down England, looking at the average house price in each schools postcode, how the cost of homeownership differs depending on Ofsted rating, and the premiums commanded when compared to the wider local authorities in which they are found.

You can view the full list of all 18,420 schools and their property market performance online here.

The research shows that higher house prices generally correspond with better schools, as property costs an average of £359,000 near  schools rated as  ‘outstanding’, £305,000 near ‘good’ schools, £277,000 in postcodes where a school ‘requires improvement’, and finally, £243,000 for schools branded as ‘inadequate’.

Therefore it costs  £116,000 more to live near an ‘outstanding’ school compared to ‘inadequate’.

With Labour unveiling plans to scrap VAT relief for private schools, it’s possible more parents could see it as more cost effective to put their children into quality state schools in the years ahead. This could have the effect of widening the property price gap between areas near the best and the worst schools.

House prices near schools versus local authorities

Interestingly, however, Yopa found that only those schools rated as ‘Outstanding’ were home to a property market house price premium. On average, postcodes boasting an outstanding school also boast an average house price some 2.8% more compared to the average found across their wider local authorities.

For ‘good’ schools the outcode price is roughly the same as the wider local authority at £305,000, -0.5% less than the average price of £307,000.

However being in the same outcode as a ‘requires improvement’ school costs £277,000, -4.6% less than the local authority at £291,000.

It’s a similar story with schools rated ‘inadequate’, where living nearby costs -10.4% less than the local authority, at £243,000 compared to £271,000.

Where good schools command the biggest premiums

The biggest chasm between the cost of property near a school and the surrounding area is in Devon’s TQ8. It costs a huge £822,000 to live in the same outcode as ‘good’ rated Salcombe Church of England Primary School, 151.5% higher than the local authority price of £327,000.

In the Northumberland outcode of NE20 there are six schools, with five rated ‘good’ and one ‘outstanding’. Living in that same outcode costs £450,000, more than double (121.7%) the typical local authority price of £203,000.

It’s a similar story in Cumberland, where the CA12 boasts four ‘good’ schools and one ‘outstanding’ school and commands an average price of £378,000 – 121.6% more than the local authority price of £170,000.

Going against the trend

While it typically costs more to live near ‘outstanding’ schools, it’s not always the case.

For example, being in the S4 outcode with the ‘outstanding’ St Catherine’s Catholic Primary School (Hallam) Sheffield costs £94,000, -57.6% less than the local authority price of £221,000.

In contrast, the East Sussex postcode of TN3 is home to an average house price some 121.1% higher than the surrounding area, despite the fact that St Michael’s Primary School is rated as ‘requires improvement’.

Therefore, while house prices generally correlate with better schools, it isn’t always the case.

CEO of Yopa, Verona Frankish, said, “Labour’s move to scrap VAT tax relief on private schools will make attending more expensive, which could persuade more parents to put their children into highly rated state schools.

“Living near a good state school already commands a premium, and if more are persuaded to move nearby that could cause the gap in price between the best and worst schools to further widen.

“Currently there’s a gap of £116,000 between the best and the worst schools, however some will see that as a worthwhile investment to give their children the advantage of a better education and it’s fair to say that those who can afford private education for their children are better positioned to stomach these higher property prices.

“This could see more homeowners priced out of areas with higher rated schools, but as always, It pays to do your research, as despite the general trend it isn’t always expensive to live near the UK’s best schools and some of the best actually offer relative affordability when compared to the wider area.”