THE holy grail for seekers after capital growth is to find an area that will increase in value by more than the bog-standard average. Investors are often encouraged to look for gritty neighbourhoods where young buyers, encouraged by low values, are starting to move in. (Less well advertised is the remarkable frequency with which this coincides with the opening of a new office by a firm of estate agents determined to drive up local prices.)

In the current climate these are the places to avoid. One of the consistent features of cooling markets is that they lose most heat at the edges. The last places to come up are the first to go down. For up-and-coming, read been-and-gone.

There are some caveats to that. Major urban regeneration schemes can lift property prices, particularly where they bring an improvement to the transport network. In its latest research bulletin, FPDSavills points out that a new tram system has lifted prices in parts of north Nottingham, as have extensions to the Jubilee Line and Docklands Light Railway in South and East London. But it also points out that any investor who banked on Crossrail is still waiting for the gravy train to come in.

In general, the safest places to buy when the market turns down are stable residential neighbourhoods. They are unlikely to be cheap — though buyers can drive harder bargains now than they could two months ago — but their high prices are based on real virtues, rather than marketing hype.

Rising up that league table of virtues is good schooling. In areas dominated by houses rather than flats, families drive demand and there is nothing like a good school to pull them in. This used to mean good state schools only, where the catchment area is strictly defined (down to 800 yards in my part of North London), but it has extended to private schools too.

In London, where one in seven children is now privately educated, pupils live ever closer to their school to avoid long daily commutes and to be near their friends. Even boarding-school families are shifting towards the school gates to allow parents more frequent appearances on the touchline and the children more weekend visits at home.

Estate agents in the wedge of England from Oxford and Hungerford west to Exeter say that values of large family houses have shot up because of the popularity of schools such as Horris Hill, Marlborough, Sherborne and the Dragon. Once buyers are in, they tend to stay there for 25 years (unless they divorce), leaving very little new stock for the next year’s intake.

Parents moving out of London are often forced to rent in order to be at the front of the buying queue, but even that is becoming difficult. One mother moving to Berkshire set off to view a property recommended by the school only to discover that another parent had got there first.

Richard Donnell, author of the FPDSavills report, suggests that schooling will remain key in driving house prices in future. “Those who want to be really clever should try to start forecasting the up-and-coming schools of tomorrow,” he says.

His main advice, however, is to stick to areas where demand is solid. “The slowdown in house-price growth we expect to occur over the next 12 to 18 months will sort out the wheat from the chaff.” This chimes in neatly with the shift being made by some developers. As we report, developers believe the market will be strongest for homes below £300,000, leading them to search for cheaper sites. Some are heading for the dreaded “up-and-coming” locations, but others are going to traditional, but unfashionable, suburbs.

One such company is St George. The London arm of Berkeley Homes has dominated development along the banks of the Thames for years. Now it is buying land in places such as Hendon in North London and West Drayton, near Heathrow. These schemes will include studio flats for the many workers who need a roof over their head and a feasible commute into town.

Tony Carey, the managing director of St George, has done cheap and cheerful before, when the company successfully redeveloped a 1960s block at the Elephant and Castle in Central London. Studios bought for less than £50,000 are now worth three times as much. If he can offer similar value for money at today’s prices in an area like Hendon, investors and young buyers will come flocking.

The great buy-to-let boom has added stock mainly to the middle and upper ends of the rental market, where demand is weakest. As FPDSavills points out in its bulletin, properties letting for £400-£600 a month have not suffered from oversupply and rents continue to rise. As confidence weakens, first-time buyers are likely to keep renting, improving demand for landlords. This figure offers a good starting point for investors trying to calculate whether to buy — or keep — a home to let.

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