September is fast approaching and if you have children, the agony and stress of finding a school placement is over — if you found one at all. There are several factors that can influence the competitive, business-friendly status of a city like Hong Kong. Tax regimes are always a factor. Transparency is crucial. Political stability is another. But general lifestyle and environment, which include availability of schools, is every bit as important. For local residents, it can also mean the difference between a $5 million mortgage and a $15 million mortgage. Maybe.
Supply, Demand, Location
It is no secret that even after the recent openings of Harrow International School and expansion of the Hong Kong Academy and Kellett that the SAR lacks enough international school placements for both existing and incoming families. Waiting lists are long and debentures (essentially personal loans given to a school to “help” with admission later on) are high, and competition to get in from local families is fierce.
There is certainly ample anecdotal evidence suggesting property values in prestige school districts are higher than others, and that parents dead set on giving their children any and all advantages are willing to take on debt they can’t afford to be in the “right” districts. But there’s no science to any of this, and while the various parts are linked, they’re more correlated than causal. “While there is generally no indicator to prove the extent of value-add of a good school network, it is not entirely coincidental that many traditional luxury districts possess a good school network, for example Kowloon Tong, Homantin, Mid-Levels, and so on,” says Jones Lang LaSalle Hong Kong Managing Director Joseph Tsang. “Demand arising from buyers seeking a good school network should also increase the level of competition for such properties, thereby contributing to increased perceived value of a property.” As is often the case with property, it’s all about location. But personal preferences, budgets and leisure tastes are important as well, and also factor into property purchases. Proximity to a good school is another value-add feature.
Tsang argues that school proximity is more a sales tool for developers than an actual tangible feature. “If we take the case of Harrow International School in Tuen Mun, we have seen an increase in developers planting their flags in the district since the school’s establishment in 2012 — including Wheelock Properties, Kerry Properties, Sun Hung Kai Properties and Henderson Land (in its latest acquisition of TMTL 500). We have also seen a gradual increase in land prices in that area.”
It could be the inevitable forthcoming infrastructure and amenities (more residents means more retail, leisure options dining and so on), but either way the numbers indicate the Wheelock and Henderson sites gained 26 and 25 percent more on premium values after Kerry made its purchase in February 2012 — just before Harrow opened. It’s not the sole reason for rising land prices — that area of Tuen Mun is also notable for its nearby beaches, country parks and yachting facilities — but it helps. “For investors, the consideration of a good school would also be important as renters in the market, especially expat communities, will generally be concerned with proximity of a good school,” says Tsang.
Education is the Future
But when it comes to leasing, it’s a bit of a different story. There is added value of a property near a good school. “Yes, it is one of the factors that can add value. Location is key,” argues Stella Abraham, head of residential leasing and relocation services at JLL. Abraham’s counterpart at Colliers International, Senior Director, Residential Leasing Clara Chu, agrees. “Property in good school network [areas] is one of the reasons to demand higher rent,” she states. “Finding the right school is a crucial factor in where potential tenants will choose to live.” It is usually in areas that are close to the school of their choice. Commute times come into play if a residence is much farther than half an hour or 40 minutes away (ESF school admissions are based on a catchment area), prompting tenants to move closer — thus increasing demand and putting upward pressure on rental rates.
Schools are vital to Hong Kong’s future as a competitive business hub in Asia-Pacific. “The lack of school placements and expensive rents remain a major challenge for multinational company tenants relocating to Hong Kong. Inadequate land development is the main factor driving prices higher and making rents expensive,” notes Colliers’ Joanne Lee, senior manager, research & advisory. “To maintain its position as a business-friendly location, Hong Kong needs to expand its housing landscape, while building more international schools can provide immediate economic stimulus,” finishes Lee.
From a leasing perspective, Abraham hedges her bets on the impact of a lack of schools on the Hong Kong market, but will admit, “Certainly families will not come to Hong Kong while they can’t place their children in their desired schools. Or they will postpone the beginning of their assignment until a placement is offered to their children,” she theorises. “Schools are always priority over housing.”