New School Policy to Affect Real Estate Prices in Beijing?

Prices for homes in proximity to good schools in Beijing could grow significantly, due to a recent announcement from the Ministry of Education in China.

Under new reforms that are due to be rolled out in 2015 across 19 cities including Beijing, students will be assigned to primary schools depending on the location of their family home. Meanwhile, local junior high schools will require 95 per cent of their enrolments to stem from residents in nearby communities by the year 2017.

This new policy is expected to help reduce the amount of bribery from parents to get their children into the best schools, according to a February 18 article from China Daily Asia.

The article stated high quality schools in the large city of Beijing have become a very scarce and sought after asset, due to the high level of growth in population and parents' realisation that education is a crucial asset to possess in early stages of life.

House prices rise in China

Unsurprisingly, after the announcement of the new school policy, there have been reports that flow-on effects have already begun to reach houses.

A March 25 article from Xinhuanet highlighted that many homes in areas with good schools have seen prices rise dramatically. The publication used the example of a local man who paid twice as much for a house in Beijing in order to get enrolment access to the great local school in the vicinity. In turn, this has created "school district housing", which largely consist of older type buildings.

What this activity can mean for buyers of residential real estate is to perhaps act fast before prices continue to rise higher. Schooling, especially high-quality facilities, are a very hot commodity among home buyers. This will also lead to favourable conditions for current home owners who wish to sell their property in the future, as higher demand will likely push up values, too.

House prices across China are already experiencing strong rises in price. Recent information released by the Bureau of Statistics of China found sale prices of newly constructed buildings rose in 69 out of 70 medium and large-sized cities. The biggest rise in sale prices was up to 18.7 per cent year-on-year to February 2014.

Established dwellings saw slightly more subdued activity after this market recorded increases of up to 15.9 per cent.

With this school policy set to roll out in the future, house prices in certain areas could see even higher growth.