Why it can be cheaper to send children to a private prep than the local state primary

Education » National survey of house prices reveals huge cost of moving into the catchment area of higher-scoring junior schools

The Victorian terraced house for sale in Penshurst Road, Hackney, east London, is nice enough. It has a good-sized garden, four bedrooms, and wooden floors. Its best feature, however, is 400 yards away – a sprawl of single-storey, pre-fabricated buildings called Lauriston Primary School. Its proximity adds £70,000 to the sale price of the house.

Parents are prepared to pay a premium to make sure their children get the best state education in east London. A new survey of house prices nationwide highlights the extraordinary cost of living in an area with a good primary school. For parents opposed to private schooling, the irony is the only way to secure a proper education is to pay through the nose.

In some cases, argues the study, it is actually cheaper to send children to a private prep school rather than a top-of-the-range state primary.

The report reveals that on average parents will spend £5,200 more in the Midlands, £9,900 in eastern England and up to £18,000 more in London to buy homes close to primary schools which are just 10 per cent above average on league table performance.

"We purposely chose to go the state sector route which involves choosing an area where the school was going to provide the sort of education we want," said Jenny Conko who sends her son to Lauriston Primary, "This was the best the state sector could provide."

Ms Conko has friends who send their children to the local private prep school. It costs them fees of about £1,500 a term. In comparison Ms Conko considers it was worth paying a premium to get into the Lauriston catchment area while keeping her principles intact.

The report, presented to the Royal Society of Economics annual conference on Wednesday by Steve Gibbons from the London School of Economics and Stephen Machin at University College London, poses fresh political challenges for the Government. The middle classes increasingly feel forced to stretch their finances to ensure their children get decent state schools.

Lauriston, a tiny block of a dozen streets in Hackney, is an area where hopeful buyers repeatedly reject any houses for sale which fall outside the catchment area. Desperation to get places at Lauriston even leads to "fake address syndrome". Couples living far outside Lauriston's tiny catchment area have asked the local estate agent, Sovereign House, to find small flats to rent, and even fail to use them, so their children can have a local address.

A four-bedroom Victorian terraced house within Lauriston's catchment is now under offer for around £430,000 although barely a quarter of a mile away, a larger four-bedroom Victorian terraced home sold recently for £360,000.

Philip Castle, the owner of Sovereign House, said: "We will get people phoning up saying they will only live on this street or that street, because of the catchment area. And they're not so bothered about the quality of the décor."

"The other schools are so poor, they will do anything to get their kids in," adds his manager, Simon Loudon.

A third of a mile from Lauriston, Orchard School scores between 59 per cent and 78 per cent on English, maths and science tests. By contrast, Lauriston scores 91, 94 and 97 per cent respectively, making it Hackney's second most successful primary and one of the best in London.

This raises a substantial concern highlighted by the Gibbons and Machin report. Although the latest league tables now show how well schools are improving and more accurately reflect the performance of pupils, they still reinforce the tendency of wealthy parents to use their purchasing power to move into the best school area. Since middle class children generally perform better than poorer children, this concentrates brighter pupils in better schools, worsening differences in school results. In turn, those children will get the best state education.

Margaret Tulloch at the Campaign for State Education says critics of school tables had long predicted this result. It would increase pressure on Education Secretary Estelle Morris to invest in poorly performing schools: "All parents should be able to rely on their local school being a good school, regardless of where they live."

Last month, the Chief Inspector of Schools, Mike Tomlinson, said variation in primary school performance was already being successfully addressed. "The gap between high and low performing schools has closed further," he said in his annual report. "The greatest improvements in standards have again been achieved, in the main, in the schools with the lowest attainment."

But according to Steve Gibbons, a lecturer in economic geography at LSE, ministers may need to consider more radical policies to effectively address this new form of economic apartheid, such as introducing admission lotteries, where parents in a much wider area have an equal chance to enter a chosen school.

"These price differentials tell us that parents are willing to pay for quality in their children's education," the Gibbons-Machin report concludes. "This means we have back-door selection," Dr Gibbons added. "If you restrict access to a school to people who live nearby, you immediately create the potential for severe inequalities."