Proximity to schools affects property demand

The UAE is probably the world's most diverse country when it comes to choosing a school for your little one. Dubai itself has over 200 schools of which 44 per cent are Ministry of Education schools, 24 per cent offer the British curriculum, 14 per cent offer the American curriculum and 12 per cent have the Indian curriculum.

Abu Dhabi also has over 200 schools, but does not boast the same variety as Dubai. However, the situation is changing, with the capital planning to build or refurbish 100 new schools over the next ten years.

Fifteen schools were inaugurated last year, while at the beginning of the current school year, five kindergartens and 21 schools opened. In January, the Abu Dhabi Education Council announced that five new schools would open during the current term.

But why are we discussing schools in a real estate column? Research shows that schools have a profound impact on real estate demand and subsequently on values, prices and rents. It seems quite intuitive that the closer a property is to a school, the more desirable it would be to families with children served by these schools.

US studies

A study conducted in Wisconsin in the US pointed out that the expected median sale price is reduced by $523 (Dh1,921) for each quarter-of-a-mile a property is away from the closest elementary school. It goes down by $1,409 for middle school and $153 for each quarter mile a property is away from the closest high school.

Another study in Ohio, US showed that school redistricting led to disrupting neighbourhood schools which reduced property values by 9.9 per cent.

A 2010 survey concluded that for the neighbourhoods that lost their schools, property values dropped substantially as residents perceived disinvestment in their community, the valued connections with existing schools were broken and transportation costs for parents and students rose. Also, according to the 2008 National Association of Realtors Profile of Home Buyers and Sellers, 27 per cent of homebuyers listed school quality and 21 per cent listed proximity to schools as deciding factors in their home purchase.

UAE impact

While the above surely holds true for mature markets, it is interesting to understand what impact proximity to schools has on real estate demand in the UAE. The real estate sector in Dubai and Abu Dhabi is still maturing and thus it is difficult to give an exact number or percentage to the relationship.

However, discussions with a number of experts on the subject have revealed that there definitely exists a relationship, though the extent cannot be quantified.

The very fact that families with children traditionally prefer Dubai over Abu Dhabi, due to the wider choice of schools in the former, speaks for itself. Within Dubai as well, schools have been known to impact residential mix in particular areas.

It is also worth noting that new schools in Abu Dhabi are enticing residents to stop contemplating the Dubai move.

While rents and property prices in the UAE have not been directly impacted as such, real estate demand is surely affected and this bodes well for the sector since it indicates that we are moving towards a maturing market, where value is based on fundamentals.

The writer is head of valuations and research at Chesterton International.