_The future of affordable education in Dubai
The education sector is now maturing, with 16 curricula available, price points that range from a few hundred dirhams to more than AED8,000 per month and internationally-branded operators commonplace. Demand for overseas brands and schools that provide something out of the ordinary has been fueled by desire for better quality education by a growing number of expatriates, perceived to have large disposable incomes.
However, the majority of new school openings have been driving up average tuition fees. A recent report by HSBC rated UAE school fees as the second highest in the world, behind only Hong Kong. Furthermore, against stagnated rate of growth in the economy, many schools missed their student enrollment targets as supply started to outstrip demand.
With more choice, parents are inevitably seeking value for money, bringing the issue of affordable education under the spotlight. In 2018, stakeholders reacted in the following manner:
- Private education service providers: Invested in costly marketing campaigns using outdoor advertising, radio and print, and introduced disruptive pricing by reducing tuition fees, introducing discounts, and implementing various scholarship schemes etc.
- Dubai Government: Intervened and issued a freeze on both private school fees and rents (for schools that rent land from its Knowledge Fund) for 2018/19
"These strategies were aimed at alleviating the worries of operator and parents alike, by reducing the burden of both fees and rents. However, they don’t tackle the real issue: how to develop schools that are affordable long-term."
Affordability is relative
At Knight Frank, we believe affordability is relative. We wanted to explore the future parameters for affordable education and consider an alternative angle by which to measure affordability i.e. affordability = 5km / 15 minutes.
In the summer of 2018, we conducted a survey with education service providers representing 58 large, small, branded and local private schools in Dubai, using the UK curriculum to enable comparisons. The aim was two-fold;
- To define affordable schools (price points and facilities)
- Is distance and / or time a relevant measure for affordability
Defining affordable schools (price points and facilities)
Participants were unanimous in their belief that providing affordable education is challenging, but said it should be accessible to the community and relative to an individual’s income.
Putting this in monetary terms, the majority of participants (80%) noted that affordable tuition fees should be less than AED33,000 per annum for Grade 1. Looking at Grade 8, the majority of participants (60%) asserted that affordable tuition fees should not exceed AED41,000 per year and at Grade 12, the majority (70%) judged affordable tuition fees to be less than or equal to AED60,000.
When asked to identify the ideal parameters for an affordable school, participants recommended that affordable schools should have 2,000 to 3,000 students, with 25 to 30 students per class. Eighty-eight percent believed plot size should be less than 31,000sq m, with 44% sighting 30,000sq m as the perfect size. Sixty-three percent of participants believed a BUA ratio to plot size of 0.8sq m to 1sq m was adequate, while the remainder stated that a lower ratio was preferable.
Testing distance / time as a measure
With a higher number and type of schools available in Dubai, parents have more choice, meaning the catchment area of a school is growing in importance. We tested this in our survey.
- Distance: In our sample, the percentage of students residing between 0-5km; 5-10km; and more than 10km from their school was evenly split, with 34% living within 5km of their school. However, excluding international brands and faith-based schools – based on the assumption that people will travel further for schools with particular brands or USPs – this ratio increases to 46% living within a 5km radius of their school. Furthermore, removing extremely price sensitive schools – those with tuition fees estimated below AED30,000 for Year 13 – 53% of a school’s student body resides less than 5km from their
- Catchment: Seventy percent of participants agreed that they have witnessed a decline in their schools’ catchment diameter due to more choices available. This is supported by the fact that the second most popular reason for students leaving schools is to move to a school closer to home, with relocation the primary reason.
Lessons learned
According to the survey, the population of most relevance lies within a 5km radius of the school, unless the school has a unique USP. We expect catchment areas to continue reducing, driven by the increase in number of schools and choices available. It will be what makes the school most attractive, with the exceptions of schools that offer certain USPs, which can still command a wider radius because they are serving a particular target market. However, as competition continues to increase, even these schools will most likely rely more on catchment area than reputation.
Education service providers and real estate developers both have lessons to draw from this:
- Education service providers: The target market is the one on their doorstep, therefore, a thorough location and catchment area analysis needs to be undertaken to ensure that the school is relevant to the neighbourhood as benefits of distinct USPs are showing signs of fading away.
- Real estate developers: Real estate developers in Dubai that are developing large master planned communities need to carefully consider the target market of their development, which will ensure they attract the appropriate operator and determine the type and size of school. Planning for the right school positively impacts the other real estate offerings by way of improved occupancy and yields.