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    China Business
     Aug 9, 2011


'Star schools' distort Taipei property market
By Jens Kastner

TAIPEI - Epoch-making educational reform is predicted to leave its mark on the Taipei City property market. In 2014, Taiwan's nine-year compulsory education will be extended to 12 years, and junior high school students will no longer have rigid entrance exams for senior high schools - it will all depend on their house address.

Instead of test scores in combination with household registration in desirable school districts, only the latter will determine the school that students get into. This, along with the huge faith ambitious parents put in the performance of so-called "star schools", has caused dramatic rises in house prices and rents in the catchment areas of the best schools.

In February, President Ma Ying-jeou promised that by 2014 all of

 
Taiwan's vocational and private high schools, as well as all public schools, would be entirely tuition-free. Students will also be able to gain admission to all but the most prestigious high schools - the "super-star schools"- without having to take an entrance exam.

However, students' addresses will count. By 2014, the ratio of exam-free enrollment based on household registration to admittance by entrance exam is expected to be 75:25, while by 2020, it will likely reach some 85:15, Minister of Education Wu Ching-ji said recently.

A property boom caused by low interest rates on mortgages and warming trade ties with mainland China was already underway, with house prices rising 12.2% last year.

The star school phenomenon has only heightened the buying fever. According to a survey by the Taiwanese real estate portal HouseFun, the prices of apartments near sought-after institutions as the Taipei City First Girls' Senior High and the Affiliated Senior High School of National Taiwan Normal University, rose by as much as over 100% over the past five years.

These houses are not even the pre-construction or new homes normally popular with homebuyers, let alone the luxury residential property in which investors from the mainland are interested. HouseFun predicts that "the star school phenomenon will only be more obvious once Taiwan implements 12-year compulsory education starting in 2014".

Often the reputation of star schools is built solely on word of mouth.

"In Taiwan, all you need is a few so-called experts or proud parents saying the school is good because their own children's teachers, test results or both were exceptional. Other parents rush to find a coveted address near that school," Mo Reddad, a lecturer at I-Shou University and commentator on Taiwan educational affairs, told Asia Times Online.

"Because my daughter ranked between first and third in grades one and two, a friend insistently asked that she use our address," Reddad said, adding that though his daughter subsequently ranked fifth to 12th in grades four and five, his friend still sent her daughter to the same school. "The status of the school was established in her mind simply because of one illustrious child," said Reddad.

One Taipei economist points out that the star school phenomenon is nothing new. He nonetheless says the problem will become more pressing, before reaching a climax shortly before and after the implementation of 12-year compulsory education.

"The phenomenon of high house prices near good schools has always existed. But regarding senior high schools, the trend has increased in recent years," said Hu Sheng-Cheng, a professor at Academia Sinica's Institute of Economics. "In the past, enrollment depended entirely on exam results and household registration didn't matter. At that time, although rents and home prices near star schools were higher than in ordinary areas, the difference wasn't huge," said Hu.

"Many parents from elsewhere simply bought or rented an apartment near the school to get an address for their children in order to gain admittance. But although those people obtained the desired address, in many cases they didn't bother actually moving there," said the economist.

Home prices in Taiwan, particularly in Taipei City and New Taipei City, a suburban area on the outskirts of the capital, have spun out of control in the past 10 years, with the property market surviving the global financial crisis unscathed. Housing prices are said to be at least 13.2 times the average household income in Taipei City, with mortgage payments taking up 54% of disposable income. The issue of high housing prices has naturally become political.

Under fire, the ruling Kuomintang (KMT) in June implemented a "luxury tax" to end property speculation. The regulation, which imposes a 15% tax on properties resold within one year of purchase and a 10% tax if sold within two years, led to a correction that seems to have been short-lived. While home costs dipped a modest 3% last month, in early August, major realty companies noted a 0.5% rise month-on-month.

Economists agree that a market they assess as "unhealthy" does not need further distortion created by thousands of anxious parents buying up houses in some 80 catchment areas of Taipei's star schools.

However, Hu doesn't see the problem as that dramatic, and predicts it could go away on its own.

"Taiwan's graduation rate is very high, the birthrate is very low, many mediocre universities are thus being eliminated, and a growing number of parents send their kids to schools abroad anyway. This means Taipei's star schools will eventually end up shedding a good deal of their significance," Hu said.

Jens Kastner is a Taipei-based journalist.

(Copyright 2011 Asia Times Online (Holdings) Ltd. All rights reserved. Please contact us about sales, syndication and republishing.)


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