The fluidity of Britain’s renter population reveals the importance of outstanding schools. Investors in all types of residential property take note.
What’s driving up the rent in parts of England? Is it the shortage of quality rental housing? Or the increase in the UK population overall? Is it the fact that fewer people own their homes today and by default have become renters?
It’s each of those things plus one more: it’s the quality of the schools. According to the UK Office for Standards in Education, Children’s Services and Skills – OFSTED – properties located nearest schools with outstanding ratings have seen a dramatic uptick in families in the seven years since the financial crisis of 2008. The broader takeaway for investors in housing development – including those engaged in UK land investing – is that proximity to quality free schools will increase the value of those properties for both rental and for sale dwellings.
In the past, prior to the recession, singles and couples without children largely rented properties nearest schools, even those that were considered some of the UK’s best educational establishments. According to Countrywide PLC statistics, only 9 per cent of rental homes had school age children near schools in 2007. But that number jumped to 28 per cent by 2015, which the lender says is due to the growing number of families living in the private rented sector (i.e., fewer young families own their homes).
Of course what’s popular with renters is quite likely also popular with homeowners. So it’s a fair assumption that, regardless of whether a family owns or rents their home, they will prefer properties nearest the schools they prefer as well. This is worth noting for investors who weigh working with different capital growth properties: schools, among all types of infrastructure, matter.
Other factors found in the Countrywide quarterly lettings index:
• Tenants living within a kilometre of a school that is rated outstanding pay 14 per cent more in rent than at properties more than a kilometre distant from the school. Builders of rental properties should scout land near the best schools for investing, perhaps.
• Tenants renting three and four bedroom flats pay an even higher premium, about 16 per cent. Instances are cited where identical homes across the street from each other let for 15 to 20 per cent more because of school quality in their catchment area.
• The margins for school catchment areas are fine. Most households moving to closer proximity of a school only move about a half mile. On average, rental moves average three miles.
Schools are not absent from any investor-developer’s considerations in building. Along with utilities, roads, hospitals and recreational parks, district heating schemes, police stations, transport and flood defences, state schools are part of the infrastructure funded by the Community Infrastructure Levy (CIL). Choosing how the money is spent is largely up to local planning authorities. CIL rates are assessed in pounds per square metre, and, according to the Planning Portal website provided by the Department of Communities & Local Government, “charging authorities should use [infrastructure planning] evidence to strike an appropriate balance between the desirability of funding infrastructure from the levy and the potential impact upon the economic viability of development across their area.”
To investors looking to maximize the capital growth potential of building new homes, the relative condition of all infrastructure components should be a consideration in the investment. Homebuyers and renters may be clamouring for properties to buy or rent, given the national shortage of homes, but these are still factors that play into where they conduct their search for suitable dwellings.
Investments of all types require myriad considerations and are best made with objective advice. An independent financial advisor can guide the investor to investigate factors having to do with specific investments as well as how they can affect overall wealth development strategies.
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