Capitalization of secondary school education into property values: A case study in Hong Kong

Abstract Investment in quality education in the neighbourhood would be supported by the people as it is often cited as an important attribute that distinguishes a community. A good quality school-network thus can be viewed as a positive amenity that is capitalized into residential property values. The study employs two hedonic models based on two large samples in order to explore the intuition that quality-school environment is capitalized into house prices. Results suggest that there is a significant effect of school-quality on house price. Potential buyers are ready to pay a large premium ranging from 27% to 39% for housing units in the top-tier school-networks. Results further reveal that the extent of capitalization of school quality into house price varies across locations. Results also suggest that property buyers rank variables such as quality school-network higher than such profile issues as age , floor level , and accessibility to transport and shopping. The findings imply that investment in quality education in the neighbourhood enhances the house property value significantly; and well-known elite schools add value to properties and increases in property price. These findings shed light on the market's ability to capitalize quality-school environment into property value though the extent of capitalization may vary across locations.