Do school ratings affect property values in the Greater Toronto Area? I was recently asked this by a client of mine and unfortunately there’s a bit of a chicken and egg argument in effect here that makes it a difficult question to answer. However, I’ll do my best to answer it without delving into a lengthy statistical analysis.
Where are the best schools in the GTA located?
The majority of top schools in the GTA are generally located in the more expensive areas of each city. This often comes as a surprise to people, but if you think about it it does start to make a bit more sense.
We know there is a strong positive correlation between affluence and educational performance. So, it would stand to reason that you’ll find the top performing schools in the more well-to-do areas of the city.
But I want to put my child into a really good school!
So, okay, you can’t afford to move into the neighbourhood with the #1 school, but the #15 school might be very attainable. How does that school perform in relation to the others?
In reality, the gap isn’t that large.
Most GTA schools perform well compared to the Ontario average and you can find many good schools in affordable neighbourhoods.
Also, you have to look further into the numbers to really assess a school’s strength. What if we looked at the school’s performance relative to the neighbourhood’s average family income? What you’d find is that there are some lower-ranked schools that outperform higher-ranked schools on that metric.
What does that mean for you? Well it means that the quality of the education is there for your child. The school isn’t lacking quality, it may just mean that on average that not every child can outscore those from more affluent parts of the city.
Another factor…Appreciation rates
If you’re reading this you obviously value the education of your child. But, at the same time, the investment we make in a home is likely your greatest asset.
And we want to make sure that asset appreciates.
What I’ve found is that there is a very strong positive correlation between neighbourhoods with very strong school performance and corresponding appreciation rates in those areas. In fact, looking back at least 5-7 years it’s clear that these neighbourhoods have appreciated more compared to the average.
The Chicken and Egg Argument
This is where things become tricky. We know that there is a correlation between affluence and test scores. We also can see that homes with top-performing schools also show higher appreciation rates than schools on the lower side of the test scores.
But, is that the main factor for the difference in appreciation rates? Or did other factors contribute to more educated, wealthy people wanting to join the neighbourhood and then test scores went up as a result?
I can’t get the data to go far back enough, but my general observation is that other factors are more strongly tied to a neighbourhood’s attractiveness than a school’s test scores. I can’t back this up statistically yet, but anecdotally through real estate it amazes me just how little people think about the neighbourhood/community/lifestyle they’re buying into before making a decision to purchase. It’s only after they do so, that they realize they’ve forgotten a massive piece of the puzzle.
So, while I wouldn’t say that school ratings ultimately have the greatest affect on property value, they certainly do play a part in helping to maintain a neighbourhood’s desirability and reputation.
As more information becomes available and the general population becomes more educated, we’re seeing homebuyers become smarter shoppers as well. This is great news as parents become more active in the education process and we attempt to give our children a brighter, educational future.
If you have any questions about schools or home values in Mississauga or the GTA, please contact me!
