Local house prices rise by as much as 1.5% in the immediate aftermath of an improved Ofsted score, according to a new study of 8,000 primary schools in England.
A single-point increase in a school''s Ofsted rating – for example, moving from ''good'' to ''excellent'' – inflates house prices in the local neighbourhood by an average of 0.5%.
This rises threefold to 1.5% in affluent areas, whereas there is almost no effect in disadvantaged neighbourhoods, according to the study''s author, Dr Iftikhar Hussain of the University of Sussex.
The reverse is also true – a worse Ofsted score deflates house prices by the same proportion.
The findings will be presented at the Royal Economic Society''s annual conference at the University of Sussex, just outside Brighton in March 2016.
Surprisingly, the team also finds that short-term changes in exam results and other measures of school quality barely create a ripple in the housing market.
Dr Hussain says:
''People seem to be using Ofsted results as a quick and easy proxy for the quality of a school, whereas they find it much harder to fathom changes in a school''s SATS results.''
''The fact there is any market reaction at all to an Ofsted score is extremely interesting, given that changes in inspection ratings are signals of short-term innovations in quality, which may be reversed in the next inspection round.''
''What''s clear from the results is that richer households are more willing and able to pay for higher quality schools.''