COMPULSORY EDUCATION ACT: EXAMINING THE EFFECT OF PRIMARY SCHOOL PERFORMANCE ON LOCAL HOUSING PRICES

Abstract

The capitalization of school quality into residential property prices has been extensively studied, both internationally and locally. However, there are no literature that looks into the impacts of education policies on residential properties values. Hence, this study seeks to fill the literature gap, using public residential housing samples during the period from 1995 to 2010 to establish a Difference-in-Differences (DID) approach within the Fixed Effects (FE) model.

In Singapore, the primary school admission system is defined by the home-to-school distance criteria. Admission criteria depend heavily on the distance between the school and home due to absence of assessment tests before primary school. Under this rule, Singaporean Citizens (SC) families living close to the school will enjoy absolute priority ahead of Singapore Permanent Residents (SPR). The priority runs in the following order whereby, first priority is given to residential properties located within 1km, followed by between 1km to 2km away from the school.

By exploiting the distance-based school allocation priority rule used in Singapore P1 (Primary One) registration exercise, this paper shall take the lead in trying to investigate the effects of the introduction of the Compulsory Education (CE) Act on public residential properties that are located near to good primary school. Results show that upon the introduction of the CE Act in 2000, public residential properties prices within the 1km school zone decline by 1.8% while, those in the 1km to 2km school zones experience a housing price premium of 1.9%. Such findings debunk the general perception of the school proximity effects on housing prices. Moreover, findings gathered from relevant graphs have also provide additional insights to this study. For instance, there could be the possibility of an announcement effect with the introduction of the CE Act.