Labour’s tax policy on private schools to drive up house prices near the best state schools

Labour’s proposed tax on private education will drive up house prices in the catchment areas of high-performing state schools, according to leading estate agent Hamptons.

The plan, which includes the introduction of VAT on independent school fees, is expected to boost property values ​​in attractive areas as parents move their children to public schools as private school fees become unaffordable.

Aneisha Beveridge, head of research at Hamptons, commented: “If Labor wins, we expect prices in the catchment areas of the top state and secondary schools to continue to outperform the rest of the market.” The Hamptons research shows that property prices in areas with highly rated schools have already risen faster compared to those in less desirable catchment areas.

Since 2008, property values ​​near schools rated ‘excellent’ have increased by 67%, while those near ‘good’ schools have increased by 61%. In contrast, properties in school catchment areas rated ‘unsatisfactory’ or ‘inadequate’ have seen growth of 59% and 57% respectively. Even with rising interest rates, properties near top schools have held their value better, with only a 1.5% decline compared to a 5.5% decline for properties near ‘inadequate’ schools.

Sir Keir Starmer has pledged to implement these tax policies immediately if Labor wins the general election. The plan includes phasing in VAT on almost all private school fees over five years, reaching the standard rate of 20%, and abolishing the business rates relief for independent schools.

Still, Beveridge noted that high interest rates could limit home price growth in these already expensive areas. “With mortgage rates being so high, it becomes extremely expensive for households to expand, keeping price growth somewhat in check,” she says. Families may have to weigh the additional costs of private school fees against the potential costs of moving and downsizing.

Wealth advisers report that some families are already moving to reduce expenses or to live near the best state schools, ahead of Labor’s policies. The Bank of England is expected to cut interest rates from the current 16-year high of 5.25% in coming months, which could revive the property market.

Hamptons has also seen increased competition for properties near state schools rated ‘outstanding’ since Labor announced the VAT proposal in 2021. Currently, around 7% of pupils in Britain attend private schools.