Schools' capitalization into housing values in a context of free school choices

Mohammad Ismail (), Abukar Warsame () and Mats Wilhelmsson
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Mohammad Ismail: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Royal Institute of Technology, Teknikringen 10B, 100 44 Stockholm, Sweden
Abukar Warsame: Department of Real Estate and Construction Management, Royal Institute of Technology, Postal: Royal Institute of Technology, Teknikringen 10B, 100 44 Stockholm, Sweden

No 22/4, Working Paper Series from Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: The issue of schools and their capitalization in property values has been analyzed extensively. Our contribution is to analyze this effect in an alternative institutional context. This case study will analyze the housing market in Stockholm, Sweden. What distinguishes the Swedish school system is that we have a free choice of schools, which means that a family does not necessarily have to live in a school district to access the schools in that area. This means that families do not have to move to the district to which they intend to send their children but can apply to send them there regardless of whether they live there or not. Nevertheless, families might be interested in living close to good schools to be within walking distance of these schools. This is especially true at the primary school level. Therefore, we have analyzed schools' capitalization in property values in the context of free school choice. We use data on transaction prices for condominiums in Stockholm's inner city. The results indicate a capitalization of living close to good schools, but this capitalization is limited. We can show that schools' capitalization depends partly on the quality of the schools and partly on whether or not they are co-located with other externalities, such as green areas. The results also indicate that capitalization is affected by income differences within the city.

Keywords: schools; housing values; capitalization (search for similar items in EconPapers)
JEL-codes: I29 R21 R23 R30 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2022-06-01
New Economics Papers: this item is included in nep-ure
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