Here’s why a good school isn’t always worth the home price premium

The well-known mantra of real estate agents is “location, location, location.” But for homebuyers with kids, it may as well be “schools, schools, schools.”

A recent RE/MAX survey conducted by Leger found that 84 per cent of Canadian parents want to check out the schools when they’re searching for a new house.

杭州桑拿

READ MORE: Why Canada wins, but many Torontonians lose, from Ontario’s new housing measures

Competition for good schools among homebuyers has set off a race in the real estate sector to offer search tools that will match home listings with information on schools.

RE/MAX just rolled out a new feature that lets users view properties within a school’s catchment area or match schools to a specific residential address.

And real estate website Zoocasa unveiled today what it says is the first mapping tool in Canada that pairs listings with not only school districts but also school rankings. While the feature is only available in Ontario for now, the company said it plans to offer the service in all of Canada within a year.

READ MORE: Why trouble at alternative lender Home Capital could reduce your mortgage options

Data from Zoocasa’s new tool shows that the real estate premium for a top school district in the Greater Toronto Area (GTA) can be as high as $800,000. In general, the home price premium for the best schools in the GTA was 20 to 36 per cent in 2015, according to an analysis by online real estate brokerage TheRedPin.

Similar dynamics are at work in Vancouver. But good schools tend to drive up real estate prices everywhere.

Still, a good school isn’t always worth a hefty home price premium.

WATCH: What’s with the Toronto housing bubble?

Before you drop tens or even hundreds of thousands of dollars more for a house in a coveted school district or dismiss a listing near an underperforming school, you might want to ask yourself the some questions. For example:

Is the neighbourhood gentrifying?

“In my experience, when young professionals start flocking into an area, the schools improve,” said Marisha Robinsky, a sales representative at Bosley Real Estate in Toronto.

Zoocasa CEO Lauren Haw agrees. Parents are a huge factor in school rankings, she notes. And highly educated moms and dads tend to be very involved in local schools. They also make sure kids do their homework and do it properly. That tends to quickly translate into better scoring on tests, helping the school climb the ranking ladder.

In general, it only takes a few years for changing demographics to have an impact on schools, said Robinsky.

Expectant parents might want to consider a school with less-than-stellar rankings in an up-and-coming neighbourhood with lots of young kids, said Haw.

WATCH: New report calls for increase in ‘Missing Middle’ housing supply in Vancouver

Are there schools nearby that don’t show up in the rankings?

Another thing to consider is that not all schools appear in rankings. For example, the Fraser Institute, which ranks schools in Alberta, British Columbia, Ontario and Quebec, does not include elementary schools in Ontario that do not enrol Grade 6 students.

Many rankings leave out religious schools or private schools, noted Haw. The new Zoocasa tool includes elementary and secondary schools under both public and Catholic school boards, but not private schools.

Before crossing off a listing in a great neighbourhood because the local public school looks iffy, check whether there are any other close-by options.

WATCH: Public-private schools could be on the way for Manitoba

Would it cost you less to send your kids to private school?

In places like Toronto and Vancouver, that might well be the case. In many instances, tuition starts at less than $4,000 a year for elementary school, according to OurKids, which offers a directory of private and independent schools.

In fact, even sending your offspring to some of the most prestigious boarding schools in the country —; which costs between $40,000 and $50,000 per year —; works out to less than $800,000.

Of course, private schools aren’t a guarantee of quality, cautioned Robinsky. Parents would have to do your own research on that.

Another drawback in opting for an out-of-district school is that your little ones may end up living far away from all their schoolmates, she added.

Still, for some families, that may be worth it if it leaves hundreds of thousands of dollars in the bank.

WATCH: Toronto schools rank among highest and lowest across Ontario: Fraser Institute

Do the rankings really tell the whole story?

You’ve probably heard this a thousand times, but it bears reminding: Every school ranking has its flaws.

Rankings are generally better at capturing how educated and involved parents are than revealing the quality of teachers, both Haw and Robinsky told Global News.

Rankings for French immersion programs often improve dramatically between Grade 3 and Grade 6 as anglophone children become proficient in the language, noted Haw.

It’s always a good idea to dig into the rankings and supplement that with your own investigative work.

READ MORE: Here’s how much climate change can cost homeowners in damages

Could you put up with a condo?

Sometimes, you might just be able to buy a home in a great school district —; if you’re willing to live in a condo.

Zoocasa data shows that there are at a couple of top-ranked public schools in Toronto where the average home price is $263,000 and $386,000 less respectively than for comparable homes in the same area of town.

READ MORE: Over half of Canadians are $200 or less away from not being able to pay bills

Editor’s note: The following paragraph has been modified to clarify that it is Zoocasa’s data analysis, not its search tool, that only includes homes with three or more bedrooms:

That’s because the school district includes lots of condos, said Haw. Zoocasa’s data analysis only includes homes with three or more bedrooms, so the statistic captures apartments large enough for families.

If you think you can do without a backyard, you might be in luck.

Of course, how much to pay for a good school is an individual choice. The last thing you’d want to do is pay less for your first home only to have to move a few years later in order to get the kids into a better school district. The transaction costs involved are so high that this is almost always a money-losing move, said Haw.

There’s also the fact that good schools tend to drive up property prices. Even buyers who don’t plan to have kids may want to buy in a top school district because of the home resale value, Haw added.

That’s why real estate developers generally operate in the best school districts, she noted. Tear-downs and major renovations require rapid appreciation within the 6-to-24 month span of the project, she added. Property close to a top-ranked school is much more likely to deliver that kind of return.

That, however, is not the game most parents are in.

“I would always be cautious in overpaying for any asset, whether it’s a house, a car, or a stock,” said Jason Heath, a certified financial planner and managing director at Objective Financial Partners.

Neither home premiums nor good school rankings are guaranteed to last forever, he added.

READ MORE: 15% of Canada’s economy vulnerable to a housing slump, RBC says