School zone changes will put pressure on Auckland prices

- School zone changes will put pressure on Auckland property prices

- Property experts expect demand to increase in suburbs with top schools

- Exclusion of new housing developments could affect developers’ ability to proceed

- Call for more investment in school infrastructure to cope with population growth

The decision by some of Auckland’s most popular high schools to close their doors to out-of-zone students will put upwards pressure on house prices in suburbs served by top schools, property experts say.

The action taken by Mt Albert Grammar, Glendowie College and Western Springs College, reported in last week’s Weekend Herald, follows moves by Mt Albert Grammar to redraw its school zones to exclude residents of a new housing development in its area.

Real estate professionals have told NZME’s property listing site OneRoof that they expect housing demand to increase in Auckland suburbs with top schools.

They also warn that the exclusion of new housing developments from nearby schools could affect developers’ ability to proceed.

Mt Albert Grammar has given notice that it will redraw its zone to exclude the 4000 homes on the Unitec site over the next few years because the school is full.

Avondale College, where more than half the roll has come from West Auckland areas outside its zone in recent years, is expected to cut out-of-zone enrolments so that it can fit in students from the Unitec development.

New infill housing and apartments are sprouting across the isthmus under the unitary plan approved by Auckland Council in 2016, which allows for 422,000 extra houses in the region over the next 25 years including 270,000 in existing built-up areas.

Property values

The redrawing of school zones is a contentious issue as much of the value of Auckland properties is tied to the schools for which they are zoned. Properties that are served by high decile schools are generally worth more than those that are served by lower decile schools.

Research published by Auckland Council earlier this year found "that across the entire Auckland Region, all else equal, a house in a decile 10 zone would be sold for around $225,000 more than an identical house in a decile 1 zone. This pattern is consistent across the region. On average, each additional decile adds about $22,500 to the price of a home."

Houses in Double Grammar Zone, which are served by top rated schools Auckland Grammar and Epsom Girls Grammar, the authors said, were "worth an additional $130,000 over and above houses that are not. All told, a home being located in the Double Grammar school zone adds massive value compared to an otherwise identical home zoned for a decile 1 school."

Indeed, the “Double Grammar Zone effect” has even made international headlines.

OneRoof talked to those in the property industry about the effect the redrawing of school zones and the shutting out out-of-zone pupils would have on the property market.

The general consensus was that the moves would put upward pressure on property prices in suburbs served by high decile schools.

Martin Cooper, a residential developer member of Property Council New Zealand, says: "For younger generations, which the industry is developing a lot of new dwellings for, school zones are a major consideration. If the purchaser has children, or intends to have children, being in zone for a quality school definitely has an impact on the decision they’ll make.

“This is evidenced by the popularity of Double Grammar Zone, for its access to Auckland Grammar and Epsom Girls Grammar. Mount Albert Grammar has had a similar impact on property prices in its zone and Westmere has experienced unprecedented growth due to the redevelopment of Westmere school.

Stonefields has been popular with first-home buyers or young families because of the new primary school, Mr Cooper said, adding that properties in Hobsonville Point, which are also served by a new primary school and secondary school, have enjoyed similar demand.

Mr Copper said: "While being in a top school zone won't be of any material benefit to a downsizing couple in their 60s with no school aged children, it still plays a part in their purchasing decision because of the underpinning of value top school zones have on property.

"There have been numerous articles on the difference in price Double Grammar Zone can have, to the extent that two sides of the same street - one in the DGZ and one out - can have an average difference in price of $250,000 for similar properties."

Quality of schooling

Chris Kennedy, Harcourts Group CEO, agrees. "School zoning is of significant importance in the Auckland property market as it has led to an increased demand for properties in some well-established suburbs. We have seen the impact this phenomenon has had in the suburbs served by Mt Albert Grammar School and Glendowie College.

"The redrawing of zones and exclusion policy will further drive demand and residential prices in suburbs that are guaranteed a school place."

Bayleys head of research Ian Little agrees that the quality of schooling in an area has an impact on property prices but cautions there are numerous reasons that add to the added value of a property. "It is our experience that prospective purchasers choose location, price and property type as the three key factors when considering to buy. Within location, this revolves around the benefits on offer in the area, and depending on the life stage of the purchaser, schooling can play a major consideration," he says.

"Upzoning can often lead to an increase in underlying land value given the ability of what can be built on top of the land. Auckland Council’s push for greater density therefore increases the underlying land value of many central Auckland locations, as well as other metropolitan zones like Takapuna, Newmarket, etc.

"Over the past five years in Auckland, it would be hard to find a location that hasn’t seen significant uplift in values. The residential market has many forces pulling and pushing it - either in or out of equilibrium - such as government legislation, access to credit, financial regulations, zoning, employment expectations, labour, material, construction costs, economic conditions and more. Singling out just one aspect of the market that drives prices is difficult as it can be different for each property, purchaser and vendor."

Viability of developments

Mr Cooper says that because the viability of new housing developments are contingent on multiple factors, although school zones are certainly one, the impact of redrawing zones may not impact on prices within the development.

“However, it may impact a developments ability to sell dwellings to a particular cohort of purchasers who will need the school zone. This could affect the developments ability to proceed. Especially in developments where there is a strong KiwiBuild offering one would assume access to schools will be an important part of the property purchase process.

“This would also impact on an investors view of a development from a rental perspective. A rental property in a good school zone will often rent better than a rental not in a good school zone and that may influence an investors decision making process. Investors are still an important part of the property market for people who cannot and will not ever be able to purchase a home themselves.”

Mr Cooper said the real question should be what work is being done to increase the capacity of schools in those particular areas in line with expected housing growth. “This will require either the expansion of existing schools or the creation of new schools and the adjustment of boundaries to fit. It’s worth noting that buyers will react favourably to the forecast of new schools or the redevelopment of an existing school. For example, Waterview Primary School redevelopment as part of the Waterview Tunnel project,” he said.

“As the city grows and changes, the education system needs to keep up.”

Increased demand

Bindi Norwell, chief executive at REINZ says that ending out of zone applications may be a necessity given the growth in population in Auckland and schools ability to cope with expanding rolls.

"Given the upwards pressure on prices of buying in a popular school zone, our concern is that this will place even more pressure on some of those areas, further adding to unaffordability issues for people to send their children to some of these popular schools," she says.

Mr Cooper agreed: “Typically when supply is restricted and demand stays the same or increases, then you expect to see an increase in prices because there are now more people looking to purchase the same thing. With the reduction in out of zone school enrolments, you would expect this to place additional pressure/ demand for houses within the school zones. Increased demand typically drives increased prices in those areas.”