What’s Driving Toronto Real Estate Prices Up? The School Factor

Urmi Desai in Top Ten Neighbourhoods, Toronto Schools, Toronto Neighbourhoods, Home Buying

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It’s time to get schooled!

We’ve updated www.realosophy.com with the latest 2011 EQAO data for over 1,800 GTA schools and the Realosophy Analytics team have taken a long, hard look at the data. Over the next few weeks, we'll be reporting on the symbiotic relationship that is Toronto real estate and Toronto schools.

Today, we’ll start with an overview of some key trends.

Move Over Starbucks

Look behind the crazy bidding wars in Toronto’s hottest neighbourhoods and you’ll find a lot of good schools. It’s not new that parents are anxious to give their kids the best start in life. (I’m reminded of the advice of a Richmond Hill high school principal once gave to my dad: “Frankly, Mr. Desai, if your kid’s smart, they’ll do great anywhere. If they’re not, well, that’s another story.”) But it’s an anxiety that’s only gotten stronger – or at least become more acted upon – thanks to the introduction of standardized testing at Ontario schools in 1995 and the reporting of results on the internet, a mini baby boom in Toronto and a growing sense that our children will be wrestling out their futures in a highly globalized bear pit of competition. Today, many home buyers with children focus their home search exclusively on school quality.

Forget about the Starbucks effect - it’s all about the school effect.

Toronto Schools are Getting Better

The good news is that our data shows that Toronto schools are improving under all this scrutiny. Compared to three years ago, there are 45% more elementary schools scoring an average of 80% or greater (this is an average of results obtained in the six different EQAO tests elementary school students write - reading, writing and math at the Gr. 3 and Gr. 6 levels). In November, a cross-Canada study carried out by Education Ministers showed that Ontario alone had students placing above the national average in all three examined subjects – reading, math and science.

Viable Options for First-Time Buyers

Want to stress out this generation of parents? Talk about the rise of house prices over the last 30 years (or more specifically, the decade-long run on house prices since the real estate collapse of the early 1990s). It’s hard to hear about bidding wars in prime schools districts like Riverdale’s Frankland Community School or St. Andrew-Windfield’s Denlow Public School and not fear that your relatively diminished earning potential may maim your offspring for life.

But these fears obscure a more hopeful reality: 46% of Toronto schools scoring an average of 80% or greater are in neighbourhoods where the average house price is less than $500,000. This stat holds up when we look at specific school districts rather than neighbourhoods. 45% of Toronto District School Board (TDSB) schools scoring an average of 80% or above serve an area in which the average house price is less than $500,000. These neighbourhoods are largely in Scarborough and North York, and are perhaps less prestigious from a purely housing perspective (“prestige” in real estate largely being a function of house prices), but not from a perspective that prioritizes schooling. Indeed, the relatively high value schooling options found in these inner suburbs may explain why they are a first choice for many recent immigrants, many of whom are highly-educated, but have yet to hit their full earning potential.

School Quality and House Price Appreciation

There is no straight-forward relationship between the quality of local schools and house prices. In order to get at a statistically accurate one, we need to control for obvious factors like house type as well as less tangible factors such as social prestige. It’s also very tricky to separate cause and effect – when we see a neighbourhood’s house prices appreciate along with its average school quality, we need to dig deeper to figure out which factor is leading and which is following. We hope to issue a future white paper on this complex topic.

Happily, some basic analysis reveals some interesting trends for home buyers to take note of now.

If you are buying into a school district that isn’t too great today, make sure it is in a “strong anchor” neighbourhood – a relatively well-established area in which other schools are performing well. Of those located in such a neighbourhood, school districts that performed below average three years ago and saw EQAO improvement in 2011 enjoyed a rate of appreciation that was approximately 50% higher than that of a neighbouring area. One anecdotal example that supports this data is Pape Avenue Junior Public School in Riverdale. Three years ago, parents wanted to skip over this average school in favour of better performing schools nearby – Frankland and Jackman Avenue Public School – but when they couldn’t get into these preferred districts, they spilled over into the Pape Avenue district. In three years time, the school’s EQAO average has increased to 87%  (from 74% in 2007) and house prices have increased by 11.5% per year (vs. a city average of 7.75%). The spillover effect is probably key here – parents who begin their home search by prioritizing good school districts are likely to get actively involved in improving their children’s performance at school, setting off a virtuous circle.

It’s important to be realistic about the impact of school quality on home prices overall. Many school districts, particularly in the inner suburbs, have realized great improvement in their EQAO scores without a commensurate increase in home prices. In general, these neighbourhoods are not “strong anchors” as defined above. In such cases, parent may judge school quality to be an investment that trumps others – an investment made in children rather than bank accounts.

Best Toronto Neighbourhoods for Schools

Whatever your personal family and home buying preferences are, we believe that good information is the key to making the right real estate decisions for you.

Starting this week, we’ll post a series of school-themed Realosophy Top Ten neighbourhoods lists:

Realosophy Schools for Home Buyers Workshop - Starts Again Sept 2012

SchoolsForHomeBuyersIf you’re buying a home, schools are likely important to you. To help you make better buying decisions, Realosophy is now drilling down to give you stats on house price appreciation and EQAO score changes at the school district level. Join our free workshop to understand latest trends, get our top neighbourhood picks and ask your own questions in a friendly atmosphere. Our popular workshops take place on the first Saturday of each month. Scroll to the bottom of this post to sign up for the next one. (Learn more about workshop)

Browse Full School Profiles on Realosophy.com

You can get yourself up to date on schools at www.realosophy.com which has been updated with the latest 2011 EQAO data available.

Search all Toronto MLS listings by school district - keep on top of new listings and see them first!

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Use our exclusive Neighbourhood Match tool to figure out which of Toronto’s 170 neighbourhoods are right for you if schools are a top priority for you (or not).

Realosophy Neighbourhood Match Screenshot

And browse our comprehensive school profiles detailing all EQAO scores, class sizes and socio-demographic statistics about the students attending that school.

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Urmi Desai is editor of the Move Smartly blog and is responsible for strategy and marketing at Realosophy Realty Inc. Brokerage. A leader in real estate analytics and pro-consumer advice, Realosophy helps clients buy or sell a home the right way. Email Urmi

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