Hidden costs of a Good Education

Julia Gillard has always been a passionate advocate for education and although there’s been heated debate over the Gonski reform package, there would be few to disagree that our education system needs a significant overhaul if we’re to successfully compete on an international arena.  As it stands, Australia pales in comparison to a host of other countries in basics such as reading and maths, and this must change.

Whilst I am largely in opposition to any proposal which suggests stripping funding from universities or converting scholarships into student loans, placing new graduates in a debt situation which - in the USA - has reached proportions oft compared to an unsustainable ‘bubble’ on the scale of their pre GFC housing crisis. The problem of providing children with a decent education also resonates across the housing market for our biggest home buying demographic – the family buyer.

No one is debating how lucky we are to live in a wealthy country which has thus far avoided the fate of Europe and America - in which youth unemployment is crippling the prospects for following generations.

However, if we’re to maintain a pool of talent essential for driving the necessary innovation to successfully navigate Australia into a post mining culture, as well as provide the necessary qualifications to enable the earning opportunities for younger generations struggling to ‘afford’ the affluent lifestyle Australia has forced upon its residents – (housing costs of which have been inflated through years of poor planning for population growth, ensuring most need to stay closely located to the capital city centres to secure adequate employment) - Education is a big part of the puzzle.

Yet it remains the case, that one of the substantial difficulties for families – or university students – fighting to gain a foothold into the best university or school suited to their needs - is locked in the cost and scarcity of accommodation.

Melbourne has experienced the largest population growth over the past decade and the subsequent squeeze has forced the greatest influx of residents into the outer suburban ‘growth regions’ – areas such as Caroline Springs, Point Cook and Melton for example, in which you can purchase a family home on a decent block of land for half the current metro median of $561,500.

Yet the advantage these regions offer in terms of affordability gets stripped away due a woeful inadequate supply of infrastructure which is always promised, but rarely delivered. This would include poor roads, nonexistent ‘fast’ public transport systems, and more importantly, oversubscribed, underfunded schools unable to cope with the massive boom of new residents – most of which are families.

Last year the Victorian government announced the development of six new fringe suburbs – Diggers Rest, Lockerbie, Lockerbie North, Manor Lakes, Merrifield West and Rockbank North – which are planned to accommodate no fewer than 100,000 new residents.  Planning Minister Mathew Guy made a point of stressing these suburbs would be adequately facilitated with appropriate infrastructure, and I don’t doubt the goodness of his intentions.  However, currently there are barely a handful of small local primary facilities servicing the area.

Despite the continual tiresome argument by the HIA that cheap credit, by way of reducing rates, is the ‘only’ quick fix answer to encourage first time buyers to the new housing market.  Many of these first home buyers are young couples looking for suitable abode to raise a family; therefore getting adequate facilities into the regional growth areas is the only long term and ‘urgent’ solution to solving current construction crisis.

This infrastructure should include well facilitated and resourced schools – which I’d advocate is something that would provide a far greater level of encouragement to move ‘outwards’ than a rate cut.

For families in the middle suburban regions of Melbourne, gaining a good education for their children is one of the main reasons many battle to stay centrally located, yet if you analyse the statistics, being in a school zone for one of the top 20 or so government schools in Melbourne can increase the price of properties in the area by at least 10 to 15 per cent – and the smaller the zone, the greater the pain.

For example, the McKinnon Secondary College, located South East of Melbourne’s CBD is one of the best-performing non-selective government schools in Victoria, yet it only has a zone of around ‘6sq km’ which spans over four suburbs.

Median House price $920,000

Comparing a property on one side of a road ‘outside’ the zone to the opposing side which falls inside the zone, can result in $100,000 ‘plus’ difference in the sales price.  Therefore, whilst the school doesn’t discriminate on ability, it unwittingly reserves a place only for those able to afford the inflated accommodation costs.

Rental yields for family accommodation are also significantly inflated for properties located within a popular school zone, and due to consistent demand, capital growth tends to provide better than average returns, therefore, it’s no surprise investors and developers are another demographic who target the localities.

Neither is it unheard of for an old property within the neighbourhood to be rented by a desperate family never intending to move in, but simply using the address to meet the criteria for enrolment into year 7.

I’ve even heard of school principals camping out early mornings and late into the evening, checking letter boxes and electricity usage to assess the level of activity in a property “suspected” of sitting vacant while the family lives elsewhere.

It’s also follows that housing within a popular school zone tends to be held for longer periods – periods lasting at least the length of a child’s secondary education and often beyond.  Issues of supply are therefore at the forefront of concern for families hoping to move in and get a bite of the educational cherry.

It was reported early last year that 229 government schools in Victoria turned students away due to pressures of capacity – the urgency of reform to ensure good teachers and educational facilities meet a certain standard across the board cannot be overstated.

The unfortunate bubble effect on real estate prices in well-established popular and restrictive school boundaries is an issue of concern for all hoping to provide their child with a good education. This is especially the case when school zones are either reduced or extended based on under- or over-capacity.

Therefore, should a property suddenly fall outside the zone, it results in an instant loss of equity. The same would result if a school moved or for some reason closed – something we saw happening with relative frequency in Victoria last year.

Below is a map from the REIV which illustrates the median house price by suburb, relative to the metro median at the end of 2012 which was recorded at $555,000.

The colours coded with the darkest blue indicates house prices which are more than double the metro median, and orange - house prices more than 25 per cent below the metro median.  (The white spaces are areas for which there is insufficient data.)

(http://reiv.com.au)

Not surprisingly, all areas surrounding the ‘good’ government schools which reportedly provide the “best” educational facilities Victoria has on offer, are a shade of blue or deep blue indicating inflated house prices. They also map very closely to the colours exhibited on recently released ABS data which ranks geographic areas across Australia in terms of their relative socio-economic advantage and disadvantage.

The orange areas are the ‘fringe’ suburbs where first home buyers or families - supposedly ‘moaning’ about inner city house prices - are encouraged to “migrate” and raise their children.

As mentioned earlier – until we can get a reasonable level of infrastructure into these localities to provide a comparable educational advantage – or fast train services to enable students and quality teachers to commute outside their immediate area – the colours are not set to change and they will continue to suffer a social disadvantage.

University students don’t find it any easier.  We all read the story earlier this year in which contained an example of a young graduate renting out a balcony in Sydney for $215 per week.  It’s little better in Melbourne, where student accommodation can often equate to a 3 bedroom house being converted into a 7 bedroom model (as below) and marketed to a potential investor offering ‘huge rental returns.’

Whilst most students expect to live in ‘sub-par’ accommodation whilst gaining their degree, it should be understood that the price, standard and supply of housing facilities is one of the major aggravations a young graduate will have to endure.

The adequate provision of secure accommodation obviously plays a significant part in the success or failure of their studies.  Expecting students to foot a larger proportion of the bill to support their term at university – as suggested in the Gillard Government reform package - will inevitably feed into the problems mentioned above in regard to overcrowded accommodation.

It will be years until we see the significant effects of increased education funding, and the issues above pose additional questions – do we do away with school zones all together? Pour a higher proportion of any funding package to the disadvantaged suburbs to level the playing field by way of providing comparable alternatives?

There does seem to be a case for highlighting the unfortunate social divide between accessing quality education and the consequential “bubble” in accommodation costs which plays into issues of relative inequality.

Catherine Cashmore