Location! Location! Education!

Apartment prices at this neighborhood complex on Haifang Road rise to 100,000 yuan per square meter, one of the most expensive xuequfang in the city. Photo: Ni Dandan/GT

Shanghai parents purchase homes so their children can enroll at the best schools

Despite the oppressive summer heat, Guan Yin and her husband have been busy house-hunting over the past few weekends. They are looking at apartments in Xuhui district and Guan is busy making comparisons and calculations.

With a potential budget of 3.5 million yuan ($565,236), the 31-year-old and her husband are looking for a two-bedroom apartment. The new home is not about improving the family's quality of life given they've already got a spacious four-bedroom apartment in Songjiang district. Instead, they are looking to plan for a better future for their son. Their son is just 8 months old.

"Xuhui has better schools, public and private, and good enrollment rates compared with other districts. The schools also promise a better academic approach, which is good for a child," said Guan, a civil servant who works in Xuhui. Over the past few years many of Guan's colleagues who used to live in Minhang district have purchased apartments in Xuhui for the same reason.

Redrawing boundaries

In China, there is a special word for these homes - xuequfang, literally school area houses. The country's education authorities require that public schools enroll pupils from designated areas - although there is now some redrawing of the boundaries for these areas every year.

Xuequfang has been becoming increasingly popular in Shanghai and this has everything to do with a mind-set prevalent among young middle-class parents today - the best kindergartens lead to the best primary schools, and then to the best middle and high schools, and the best universities. And eventually they lead to a better life.

But the phenomenon has made it hard for some of the popular schools in the city to ensure the quality of their teaching is maintained as they try to cope with growing numbers of students. Xuequfang has also helped push property prices to irrationally high levels.

Aiming to make a change, education authorities in Jing'an district stated in April this year that they would adopt a new policy which would mean that every apartment in the area would only be allowed to send just one child (twins excepted) to a given school every five years.

Changning district followed, announcing that several of its popular primary schools would adopt new enrollment rules. Intending students need to meet at least one of these three criteria: the child's hukou (permanent household registration) will have to have been registered at a property in a school's enrollment area and the property will have to have been owned by the parents for more than a year; or the child's hukou has been registered at a property in a school's enrollment area and the property has been owned by grandparents for more than three years; or, if the family only has the "use rights" of a property in a school's enrollment area, the child and the parents need to have been registered at this address from the child's birth.

In Shanghai there are two forms of house ownership - outright ownership which entitles the owner to full rights to the property; and "use rights" which give the owner a lease with the housing administrative authorities or the organizations that own the properties and the right to sell or rent the house. "Use rights" homes have been historically designated and are usually smaller and found in downtown areas which make them attractive for people looking for addresses close to leading schools.

Off the list

"The new rules have taken the schools in Changning off my list," commented Qiu Limin, the mother of a 3-year-old boy. Qiu had been hunting for an old apartment probably with "use rights" in the enrollment area for the Xianghong Primary School. "The property prices ranged from 43,000 yuan to more than 70,000 yuan per square meter in the area. But this is comparatively affordable given that some really old apartments can be as small as 20 square meters."

Qiu said by starting her house hunting late she had missed a great opportunity to make an investment for her son. In fact, many parents nowadays started planning for these apartments when their children were just babies.

"It's never too early to make plans for your child. Most young parents today attach great importance to education for their offspring. An early start will only save you money. On the same budget, colleagues purchased three-bedroom apartments just two years ago," Guan said.

She is now considering apartments in enrollment areas for second-tier public schools in Xuhui. "Property prices in areas around first-tier schools start at more than 50,000 yuan per square meter, which is too much for me."

Guan is not among the minority making such a preparation when their children are so small. A survey carried out by a Shanghai online real estate information provider in 2012 indicated that nearly 20 percent of the respondents say they would buy a xuequfang before their children were born and another 42 percent say they would make the purchase before their children reached school age.

In recent years, parents in the city have apparently been getting into xuequfang earlier. Zhuo Juan, the mother of a grade 4 girl, purchased a 30-square-meter apartment just before enrollments there started so she could enroll her child at an experimental kindergarten in Pudong New Area and two years after that she bought another 70-square-meter apartment so the girl could attend a key district-level primary school also in Pudong.

"The notion of xuequfang was already prevalent back in the late 2000s. But usually parents didn't need to rush into buying an apartment that long before their children were old enough to go to school," she said.

Zhuo said back then the property prices were comparatively acceptable, there were no restrictions on purchasing property - she even got a discount on the mortgage interest rates. Moreover, she apparently made money from the investments she made for her daughter's education.