New schools will boost property values on KZN’s coast

Private Property South Africa

Good schools increase demand for property in the surrounding areas, and plans to build new schools along KZN’s coastal areas will have a positive effect on the local property market.

Globally, people are prepared to pay a premium for properties in suburbs that have good schools, says Gareth Bailey, Pam Golding Properties area principal for Durban Coastal. “While our North Coast property belt is developing at a relentless rate, fortunately there are sufficient plans in place to deliver quality schools and tertiary institutions to meet the educational needs of these suburbs. The establishment of quality schools and universities in areas such as these will have a significant effect on the strength of these property markets in the long run.”

Bailey says according to the London School of Economics (LSE), a 2006 study in the UK showed that people were prepared to pay substantially more for properties close to good state schools. According to Steve Gibbons, a professor at the LSE, “a primary school one standard deviation above the average in terms of the performance of its pupils … attracts a house price premium of around 3%. This means that a school right at the top of the league tables attracts a premium of around 12% relative to one at the bottom. At the time of the study in 2006, this was equivalent to £21 000.”

A similar picture emerges for Paris, where in 2004, the best schools attracted a premium of up to €17 500. However, this is not just a European story - many studies from the United States and elsewhere produce similar results.

For example, in 2010, the Wall Street Journal reported on the correlation between school performance and home values. When the state of Florida rolled out its new school grading system, home values were directly impacted. The values of homes in neighbourhoods with A-rated schools increased by as much as $10 000 over similar homes in neighbourhoods with B-rated schools. Over a few years, that gap has widened and home values could now vary by anywhere from $50 000 to $300 000 a home, based on the current rating of the school in that neighbourhood.

Says Bailey: “Since quality educational institutions have a significant impact on the strength of property markets, it is important that the new suburbs along our North Coast property belt incorporate sufficient plans to establish these types of institutions.

“Despite significant residential growth, no new schools have been established in our greater uMhlanga area in the last 15 years and our coastline is in desperate need of additional quality school and tertiary education options.

“Fortunately, Tongaat Hulett Developments (THD) is aware of this surging demand and has conducted independent research which has formally identified educational gaps in our area. It has subsequently identified and engaged with educational institution providers on a national basis.”

As part of its strategy to provide complete living environments with an inclusive growth focus, THD has identified two short-term opportunity sites which has resulted in the confirmation of two new schools. ADvTECH will be opening a new facility in node 5 of the 1 000ha Sibaya Coastal Precinct, positioned south-east of the M4 and uMdloti Main Road, which could serve some 10 000 residential units.

According to Sithembiso Mthembu, Head of Development Execution for THD, this is just the start – “The number of residential units that are occupied within Sibaya Coastal Precinct will be growing significantly in the next five to 10 years, and so will the opportunities for more educational facilities to meet demand.”

A similar facility operated by the Curro brand will be opening in Cornubia in uMhlanga. Both facilities will cater for primary and high school needs totalling 2 000 students each and will be pitched at the middle-income market segment.

Sibaya will also provide space for the development of tertiary institutions over the short to medium term. Further afield, THD has prospective educational facilities marked for iZinga, oTongati and Ballito which are all areas that are expanding at a significant rate. Specific opportunities are currently being developed and will soon be used to engage with educational institutions.

According to Xoli Shabalala, Executive Head Market Solutions at THD, the company is “conducting a regional-wide assessment taking into account existing pipeline residential developments which are likely to trigger even further demand for schools.”

Adds Bailey: “While many may feel that the supply of quality schools and tertiary institutions along our coastline is trailing the rate of residential property development, it is encouraging that there are substantial plans afoot by THD to make land opportunities available to future educational institutions.

“I believe that market forces will ultimately capitalise on these opportunities and drive solutions that will both serve the educational needs of our new residents as well as help to underpin demand for these areas and hence the strength of these property markets in the longer term.”

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