There is considerable evidence that families will pay a premium to buy a home in areas that provide attractive school options, particularly locations situated within a desirable public school zone. However property investors should think carefully before committing to a real estate investment in similar locations.

Recent analysis from the Real Estate Institute of Victoria (REIV) shows that buyers are still paying significant premiums for homes within popular public school catchments in Melbourne. In the 12 months to March 2025, the price difference reached up to 35% or $500,000 more compared with homes just 1 km outside the zone. The largest premiums remain in areas like Williamstown, Glen Waverley, East Hawthorn, Balwyn North, and East Doncaster.

For many families, these premiums feel justified when weighed against the rising costs of private school tuition making the one-off property uplift a strategic choice over years of school fees.

But Capital Growth Is Often Weaker Inside These Catchments

The trade-off for investors? While the prestige of these zones pushes entry prices higher, long-term capital growth often underperforms neighbouring suburbs:

1. Princes Hill & University High School catchments in Melbourne had a $357,000 premium, yet 15-year growth was around 82.6%, compared to 106.3% just outside the zone.
2. Across nine catchments analysed by Cotality in Sydney and Melbourne, six recorded weaker capital growth than comparable homes beyond the school boundaries suggesting buyers may be paying too much upfront for slower appreciation over time.

Why the Slower Growth?

According to Cotality’s Head of Research Eliza Owen, the most likely reason is affordability pressure: properties inside these zones are already priced so high that their capacity for further growth is naturally constrained.

Boroondara: Premium Demand Meets Supply Limits

Boroondara continues to be a prime example: a tightly held municipality with top schools, excellent public transport, and heritage streetscapes but also significant supply challenges.

1. A 2024 Yimby Melbourne report recommended that Boroondara Council deliver 4,900 new homes to address inner Melbourne’s shortage, but council pushback has centred on infrastructure constraints and community sensitivities.
2. The Allan Government’s target of 67,000 new homes in Boroondara over 30 years around 2,400 annually has been described by local officials as unrealistic without major infrastructure investment

This combination of strong demand and limited supply means prices remain elevated even when growth is slower than surrounding areas.

Bottom line: Families will likely continue to pay a premium to secure a home in a sought-after public school zone. For investors, however, the equation is different high buy-in prices can cap future growth potential. Those looking for stronger long-term returns may find better opportunities just outside these high-demand catchments, where investment prospects are often more robust without sacrificing strong rental demand.