The effect of school quality on house prices in the global south: evidence from South Africa

• Date: 02 August 2023
• Pages: 70-86
• DOI: https://doi.org/10.1108/IJHMA-05-2023-0066
• Published date: 02 August 2023
• Subject Matter: Property management & built environment,Real estate & property,Housing markets
• Author: Anthony Owusu-Ansah,Samuel Azasu,William Seremi Thantsha

The ef‌fect of school quality on

house prices in the global south:

evidence from South Africa

Anthony Owusu-Ansah

Department of Land Economy, Kwame Nkrumah University of Science and

Technology, Kumasi, Ghana

Samuel Azasu

School of Architecture, University of Navarra, Pamplona, Spain, and

William Seremi Thantsha

Gauteng Department of Infrastructure Development, Johannesburg, South Africa

Abstract

Purpose –This paper aims to investigatethe effects of school quality (SQ) on residential property prices in

Johannesburg, South Africa. Previous studies have empirically examined the quality of private and public

schools without a standard proxy that is accepted in the literature. As a result, this paper extends the

literature to the global south by the effect that SQ has on residential property price changes in the local

marketsof the City of Johannesburg.

Design/methodology/approach –The research adopts the hedonic pricing model to evaluate and

quantify the impact that the structural attributes such as erf size; number of bedrooms and bathrooms;

and SQ measured by pass rates, sport rankings and quality of facilities have on house prices. A total of

2,763 property transactions covering the Kensington and Observatory areas of the City of Johannesburg

over the period 2010 and 2020 were obtained from the deeds registry and used for the empirical analysis.

Findings –The study f‌inds that SQ has a positive impact on house prices. When the average pass rate

of the model school increases by 1%, all other things being equal, house pricesalso increase by 1.8%.

This suggests that people who live closer to the model school are willing to pay more when the school

performance improves.The 1.8% premium this study attributes to a 1% increasein school performance

is however generally low when compared to some f‌indings in the literature sugge sting that there may be

some other important factors that households consider when purchasing their home.

Originality/value –The main contributionis uncovering the relationship between the SQ and residential

property prices in the local markets, using Kensington and Observatory in Johannesburg as sampled areas.

Due to the presence of reliable and quality of datasets, such studies are not many in the global south and a

study of this naturein South Africa is notably not existing in the literature.

Keywords House prices, School quality, Hedonic pricing models, Location, South Africa

Paper type Research paper

Corrigendum: It has come to the attention of the publisher that the article, Owusu-Ansah, A.,

Azasu, S. and Seremi, W. (2023), “The ef‌fect of school quality on house prices in the global south:

evidence from South Africa”,International Journal of Housing Markets and Analysis, Vol. ahead-of-

print No. ahead-of-print. https://doi.org/10.1108/IJHMA-05-2023-0066, incorrectly listed the af‌f‌iliation

“Gauteng Department of Infrastructure Development, Johannesburg, South Africa”as “Department

of Infrastructure and Development, Johannesburg, South Africa”. This oversight has now been

corrected.

IJHMA

18,1

70

Received13 May 2023

Revised9 July 2023

Accepted12 July 2023

InternationalJournal of Housing

Marketsand Analysis

Vol.18 No. 1, 2025

pp. 70-86

© Emerald Publishing Limited

1753-8270

DOI 10.1108/IJHMA-05-2023-0066

The current issue and full text archive of this journal is available on Emerald Insight at:

https://www.emerald.com/insight/1753-8270.htm

1. Introduction

Real estate plays paramount role to the development of many countries, household’s wealth

portfolio and the overall social growth (Owusu-Ansah, 2018). For decades, property sale

prices (SPs) have exhibited highly localised differences that cannot be explained solely by

variations in the physical attributes compositing a property (Gibbons, 2011;Owusu-Ansah,

2012b). As a result, continuous attempts to understand the idiosyncrasies of property

markets, particularly the underlying dynamics of macroeconomic and microeconomic

attributes that contribute to the implicit price of a property, are mostly at the national and

regionalscale as opposed to the locallevels.

The property market is highly heterogeneous and this heterogeneity arises from differences

in physical characteristics of the properties, types of properties and the locational elements that

determine the value of a particular property (Dodds, 2010;Owusu-Ansah, 2012a;Owusu-Ansah

and Talinbe Abdulai, 2014;Owusu-Ansah, 2018,2012c,2021). The major problem usually

arises from this heterogeneity is the failure to incorporate the full-range of relevant

neighbourhood characteristics and other important unobserved property attributes in the

analysis of property markets, particularly during property valuations (Owusu-Ansah, 2012c).

Using the hedonic pricing model (HPM), several studies have empirically modelled and

identif‌ied so many factors that affectproperty prices, especially in the global north markets

(Clapp et al., 2008). Even in the global south, hedonic pricing studies have achieved its fair

share. Machin (2011) asserts that numerous locational factors can act as determinants of

housing expenditures due to their state of quality that can be measured in value and

capitalised into housing selling prices. This includes, but is not limited to, other quality

public goods such as recreationalareas and facilities (e.g. parks, swimming pools and tennis

courts), community services (e.g. libraries and clinics) and landmarks (e.g. transport nodes,

museums, historicbuildings and statues) within close proximity to residentialproperties.

The seminal studies conducted by Oates (1969),Rosen (1974) and Black (1999) suggest that

consumers maximise their utility through their decision to reside in a neighbourhood that

provides the greatest surplus in terms of benef‌its over cost. Among these neighbourhood factors

is school quality (SQ). As shown by Khachiyan (2013), for many people, the quality of a good

school is an imperative consideration when buying a house. Quality educational facilities within

urban vicinities (or around employment areas) are highly valued by households and potential

homebuyers (Gibbons, 2011). Inconspicuously, their housing purchasing behaviours reveal a

somewhat lack of comprehensive understanding of the actual monetary value or effect quality

schools have on their housing selling prices (Wen et al., 2019). This is because most studies have

either ignored the effect of SQ on property prices or have failed to incorporate the full range of

relevant SQ attributes in their hedonic regression models (La, 2015;Ka-wai, 2010). The few

studies on SQ virtually indicate a consensus that there is a positive correlation between certain

SQ attributes and property prices. For instance, FengandLu(2010)f‌inds that an additional

quality senior educational facility improves the value of properties in Shanghai by 6.9%. A

study in China by Hu et al. (2020) demonstrates that the per square metre value of a residential

property within close proximity to a quality primary school catchment area has a price of

approximately 6.8% more than that of properties located outside that catchment area. Another

empirical study shows that homebuyers in Hong Kong are willing to pay about 27%–39% more

to be situated within a key school district (Jayantha and Lam, 2015). Despite these empirical

studies, it is still debatable as to which specif‌ic variables count as appropriate measures of SQ

and how they contribute to property price variations.

The lack of a standardised proxy to accurately estimate the added value of SQ has resulted in

scholars, including Ka-wai (2010) and La (2015), adopting a myriad of varying school at tributes

to represent the real value of SQ on burgeoning prices in those areas being investigated. The

Ef‌fect of school

quality on

house prices

71