Why it pays to invest in a place near a popular school

A glimpse of how distance-based balloting in P1 registration could be impacting the property market

Christine Sun

Oct 24, 2021

Properties near popular schools are highly sought after by both investors and parents.

Many parents go to great lengths to secure a place in good schools by renting or paying top dollar for a nearby property. They believe that their chances of getting their children in the school of their choice will go up significantly by moving closer to these schools.

This year, almost half of all primary schools require balloting in Phase 2C, an open phase for those with no links to the school.

The Ministry of Education (MOE) has announced that the number of places allocated to Phase 2C will be doubled to 40. With this change, more phases of the Primary 1 registration, like the alumni (Phase 2A) and parent volunteer (Phase 2B), may require balloting in the future.

As competition intensifies for coveted places in popular schools, living within 2km may no longer suffice. To have a higher chance at almost every phase, families may have to move even closer to be within 1km of their preferred schools.

We have studied the property prices and sales trends near 20 renowned primary schools and our preliminary findings may provide a glimpse of how distance-based balloting could be impacting the property market.

1. HOUSING DEMAND IS STRENGTHENING

Currently, proximity to popular schools is often cited as one of the key selling points in the real estate market. Condominium units near popular schools usually sell out faster than their counterparts within the same district, and such properties can draw a price premium of up to 15 per cent.

Some of the new condominiums within proximity to popular schools have seen strong sales over the past year. They include Fourth Avenue Residences near Raffles Girls' Primary School in Bukit Timah, Kopar at Newton near Anglo-Chinese School (Junior) in the Central area, Verdale near Pei Hwa Presbyterian Primary School in Bukit Timah, Affinity at Serangoon near Rosyth School in Serangoon North and Leedon Green near Nanyang Primary School in Bukit Timah.

Housing demand has surged significantly near renowned schools, especially in suburban areas. The higher sales could have coincided with more properties launched in these areas in recent years.

According to caveat data from the Urban Redevelopment Authority (URA), more than 6,200 condo units were transacted in District 19 from 2019 to July this year. Of this number, about 1,300 units or 21 per cent were within 1km of Rosyth School.

Sales volume was similarly substantial in District 20 where Catholic High School in Bishan and CHIJ St Nicholas Girls' School in Ang Mo Kio are located with 1,670 transactions recorded, while 3,140 transactions were inked in District 10 where Pei Hwa Presbyterian Primary School, Methodist Girls School in Bukit Timah, Raffles Girls' Primary School and Nanyang Primary School are situated. Some of these schools were heavily oversubscribed and held balloting at earlier stages of the Primary 1 registration this year.

As more properties are transacted near renowned schools, the subscription rates may climb further in the future.

2. FASTER PRICE APPRECIATION FOR NEARBY CONDOS

Properties near popular schools are reaping good investment returns. Resale condominiums within 1km of the 17 schools saw significant price growth over the past two years, seven of which rose by more than 10 per cent.

Properties within 1km have also experienced faster price appreciation than their counterparts within the same district. For instance, the median price of resale condo units near St Hilda's Primary School in Tampines rose by 32.8 per cent from the first seven months of 2019 to the same period this year, more than the 2.6 per cent overall increase for resale condo units in District 18.

Similarly, the prices of properties near other popular schools in our study rose faster than their district average - Tao Nan School in Marine Parade (14.1 per cent, versus 7.5 per cent in District 15), Nan Hua Primary School in Clementi (13 per cent, versus 5.5 per cent in District 21) and Ai Tong School in Bishan (16.4 per, cent versus 13.3 per cent in District 20).

3. DOUBLE-DIGIT PRICE GROWTH FOR NEARBY RESALE FLATS

Many families may opt to purchase resale flats given the price affordability. As a result, prices of resale flats near popular schools have been climbing substantially in recent months.

Eleven of the 15 schools (with resale flats within 1km) saw double-digit price growth over the past two-plus years.

Resale flat prices near Nan Hua Primary School registered the steepest price appreciation of 45.4 per cent, followed by flats near Pei Chun Public School in Toa Payoh (36.6 per cent), CHIJ St Nicholas Girls' School in Ang Mo Kio (21.4 per cent), Red Swastika School in Bedok (17.7 per cent), and Tao Nan School (16.3 per cent).

Resale flat prices within 1km of some popular schools have similarly risen at a faster rate when compared with the town median price. The price growth near Nan Hua Primary School was 24.4 percentage points more than the increase in Clementi.

Prices of flats near Pei Hwa Presbyterian Primary School (18.1 percentage points) and Ai Tong School (12.8 percentage points) were similarly higher than the increase in median prices for their respective towns.

However, there were some exceptions where prices near Rulang Primary School in Jurong, and Nanyang Primary School and Maha Bodhi School in Geylang grew at a slower rate than their town median price. The sluggish price growth may be attributed to fewer new flats built in these areas which tend to fetch higher prices after their minimum occupation period.

4. HIGHER RENTAL DEMAND

Rental demand for condominium units around popular schools near city areas can be two to three times more than those in suburban areas. Due to a lack of flat supply, some families may choose to rent in prime locations, which can be more affordable.

Given a minimal occupation period of 30 months for addresses used in the Primary 1 registration exercise, the entire rental cost for condo units in these districts could average around $120,000 to $150,000, a small fraction compared with a purchase price of $2 million to $3 million for a nearby condo unit. Comparatively, there are fewer people renting near popular suburban schools. Perhaps purchasing a $1 million to $1.5 million mass market condo unit may make more economic sense than incurring a $100,000 rental sunk cost.

As a result, we observe higher rental transactions within 1km of popular schools in prime locations, such as Anglo-Chinese School (Junior) (8,111 units), Anglo-Chinese School (Primary) in Novena (4,475 units), Nanyang Primary School (3,924 units), Tao Nan School (3,879 units) and Singapore Chinese Girls' School in Novena (3,487 units) from 2019 to July this year.

In contrast, schools in the suburbs like St Hilda's Primary School (389 units), CHIJ St Nicholas Girls' School (372 units) and Poiching School in Tampines (288 units) recorded much fewer rental transactions.

Rental demand was also higher in areas with fewer flats or condominium launches. For instance, properties within 1km of Rulang Primary School accounted for 56.5 per cent of the 6,780 rental transactions in its district. Properties near Maris Stella High School in Braddell similarly made up 63.6 per cent of the 4,577 rental transactions in District 13.

MOVING FORWARD

It is certainly more convenient for families if the children attend schools near their homes. However, the number of people buying or renting properties to improve their Primary 1 ballot chances will inevitably increase with income growth and rising affluence.

Parents planning to move closer to popular schools may need to shell out more, given the increasing property prices. On the other spectrum, owners of such homes may potentially see higher investment returns in the long run.

Since the authorities plan to inject more public housing in prime areas, they may consider building more Build-To-Order (BTO) flats near popular schools to level the playing field for lower-income Singaporeans. Popular schools could also be merged with a few neighbourhood schools to form mega schools in the suburbs to cater to the growing population and give more students a chance to attend such popular schools.

As enrolment increases, the priority admission zone ring around mega popular schools may be expanded to cover more homes in the vicinity. Alternatively, all children within 2km-3km could be allocated equal ballot chances, which may negate the necessity to move right next to popular schools, thus helping to slow property price hikes in the long run.

•The writer is senior vice-president of OrangeTee & Tie Research & Analytics.