Is School District a Critical Factor in Housing Prices?

“I don’t think I have to move to Gangnam. You can send your kids to a school there from here,” said Kim.

Kim, a mother of two schoolers, was planning to move to Gangnam, an affluent district in Seoul, this year or next because she had to change her address to send her children to schools in Gangnam.

Kim, however, recently gave up on her plan because the introduction of a new system that allows students and parents to choose any high school in Seoul would allow their kids to attend schools in Gangnam. The new system, which becomes effective starting 2010 in Seoul, has affected the housing prices in Gangnam and Mok-dong, regions that are famous for good school districts.

Every fall, housing prices and rents in these areas used to rise, but that is not the case this year. With various real estate policies aimed at curbing housing prices, real estate experts think that the availability of good schools, regardless of region, seem to have caused a fall in prices.

According to Real Estate 114, a real estate information company, the prices of an apartment unit in Seoul rose by 1.08 percent on average this year. By contrast, affluent regions were the opposite: Gangnam-gu fell by 1.3 percent, Seocho-gu by 0.62 percent, and Yangcheon-gu (which includes Mok-dong) by 4.42 percent. Rents were no exception. Rents in Seoul rose 2.63 percent on average, but those of Gangnam-gu decreased by 0.25 percent and Yangcheon-gu by 1.49 percent.

September is a month when many people move, and price changes have always been prevalent at that time, but that is not the case this year. For example, the “Jeonse price,” a unique Korean rent system in which tenants have to pay a deposit first and get it back without interest later when they move out, of an apartment unit in Mok-dong did not rise this year. In September 2005, it rose from 270 million won to 280 million, and in September 2006, it increased from 310 million to 325 million won.

The primary reason for the change is the government’s policies to curb rising housing prices. In addition, the new high school choice system discouraged people from moving to Gangnam or Mok-dong. Moreover, as the importance of high school GPAs for college admission increases, many people seem to be considering sending their children to non-Gangnam schools because they are less competitive.

A real estate agent in Gangnam said, “Not many people are moving out of Gangnam because of the changes, but it is hard to deny that not as many people want to move to this area. Until last year, people from the Gangbuk and metropolitan areas asked for apartments for rent, but this year, it is not the case.”

However, there is a disagreement over whether the benefits of a good educational environment will not matter any more, as there are still many cram schools in Gangnam and Mok-dong, and these districts have many other advantages as residential areas.

Park Won-gab, the vice president of Speed Bank, a real estate information provider, said, “Schools are only one of the factors that influence housing prices. The new system has a limited influence on the prices in Gangnam and Mok-dong.”