The introduction of VAT on private school fees has sent ripples through the housing market since January.
While designed as a revenue-raising policy to benefit schools, its effects are being felt most acutely in local property markets, as the first full school year under the new rules reveals.
Rising fees are pushing many families out of the independent school system and back into state education. This is creating additional pressure on local authority schools, many of which are already oversubscribed.
Figures obtained by The Times earlier this year show at least 27 local authorities struggling to accommodate demand in certain year groups, from rural South Gloucestershire and Rutland to urban centres including Bristol, Hull and Coventry.
Years 7 and 8, where demand peaks, are particularly affected; Nottinghamshire reported 468 additional Year 7 pupils, Walsall 258 and Bristol 177*.
Competition is likely to intensify further for grammar and selective schools, which can receive up to 3,000 applications for around 100 places, even before VAT changes come into play.
More recently, the Department for Education released data showing private schools in England lost 11,000 pupils in January 2025 compared to the previous year, a 1.9 per cent decline, which the government largely attributes to demographic shifts.
But, even allowing for population trends, the numbers suggest a clear response to VAT changes. The Independent Schools Council estimates around 8,000 more pupils than ministers anticipated have left independent education so far. The impact is modest in headline terms, yet it is already influencing families’ choices and the local housing market.
To manage this demand, some schools are restricting catchments to as little as 0.8 miles.
Within these zones, property valuations in areas like Bramhall, Stockport, home to nine well regarded schools, are up 10 per cent on the previous year and 6 per cent above the 2022 peak of £533,809. While sales just outside these zones were typically down by 2 per cent.
Independent schools themselves are also feeling the strain. With 19,000 pupils already leaving private education, this figure is projected to rise to 37,000, with 35,000* moving into the state sector.
Rising costs and falling enrolments mean estate decisions carry significant financial and operational implications.
Many independents are now having to reassess their estate strategies, from unlocking property value to refinancing, restructuring or in some cases, preparing to exit.
At this critical time, there is an opportunity for schools to optimise property assets and strengthen long-term sustainability with careful planning and the right advice.
VAT on private schooling illustrates just how far-reaching policy decisions can be.
Families, schools and agents are navigating a fast-moving, high-stakes market. Those who plan strategically will protect value, while others risk being priced out or left with underperforming assets.
