Anyone who has children understands the importance of having a home in a sought-after school catchment area.

For those who don't know, school catchment areas are geographical zones within which families must live if they want their kids to enjoy automatic enrolment at a particular academic institution. Those located outside of a catchment area can still apply to join the school, but their place isn't guaranteed and they are likely to end up on a waiting list.

The presence of a well-regarded school can cause local prices to skyrocket within a short period of time.

Unsurprisingly, the better the school, the more popular the homes are in the local catchment area. But what does this mean for property investors? Should buyers take advantage of this trend

Let's examine some of the potential opportunities and risks of purchasing an investment property in school catchment areas.

Do prices rise in school catchment areas?

Real estate prices inevitably increase in locations where there is high demand for housing but limited supply – and school catchment areas are no exception.

Property solutions website Domain tracks some of the most popular schools across Australia, as well as the dwelling values in the relevant suburb. The results show the presence of a well-regarded school can cause local prices to skyrocket within a short period of time.

Homes close to primary schools are especially sought after. Domain's figures show that house prices climbed more than 40 per cent in a single year in the hottest locations. For example, the average value of a home near Glen Huntly Primary School in Melbourne jumped from $835,000 in October 2015 to $1.18 million in October last year.

Logan Reserve State School helped local prices in Queensland jump 40 per cent, while owners of property in the Neutral Bay Public School catchment area experienced increases of 31.4 per cent.

Property Investment Store and school catchment areas. Catchment areas near good primary schools can experience a considerable rise in property prices.

Secondary schools didn't have the same impact on property values, but the top 10 growth areas in Australia still achieved price rises of between 18 and 32 per cent. Hunters Hill High School and Rose Bay Secondary College, both in NSW, resulted in year-on-year home value increases of approximately 20 per cent.

Are there any risks?

You could be forgiven for thinking that purchasing an investment property in a school catchment area is a no-brainer based on price rises, but there are a number of other factors you should consider.

Catchment areas change: Schools can choose to alter their catchment areas, and this usually results in a size reduction when the institution is becoming increasingly popular. In other words, a property you buy in a catchment area today could fall outside the boundaries without warning in a few weeks' time. This could have a significant impact on the home's desirability and value.

Prospective buyers should discuss their options with experienced property investment specialists to see whether or not a particular purchase is suitable for their needs.

Schools can decline in quality: An excellent school can see its performance suffer for a number of reasons, which may affect the number of families hoping to purchase nearby. The opposite is also true, however, so a shrewd investment in an area where a school is marked for improvement could be lucrative.

A desirable property is still important: A property's location in a school catchment area isn't enough to guarantee good returns. A one-bedroom apartment isn't going to attract a couple with two children, for example. Homes in poor condition are also less appealing to families.

Ultimately, buying an investment property in a school catchment area can deliver excellent returns. Not only does local real estate typically increase in value, but vacancy rates are often lower and rental income higher due to demand.

However, prospective buyers should discuss their options with experienced property investment specialists to see whether or not a particular purchase is suitable for their needs.

Please contact PI Store today for more information.

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