The Swiss bank UBS has named the cities with the highest risk of a “bubble” in the real estate market. The Swiss bank UBS has published a new version of the UBS Global Real Estate Bubble Index. Bank analysts have studied the prices of residential real estate in 25 major cities around the world.
The highest risk of a “bubble” in the market, as in 2019, was in Munich: the bank’s assessment was 2.35. Last year it was 2.01. The second place was taken by the German Frankfurt am Main, which in the last year’s index only closed the top five. If in 2019 his estimate was 1.71, then this year it rose sharply to 2.26. Toronto was named the third city, down one line, its estimate changed from 1.86 to 1.96. Other cities at risk of a bubble include Hong Kong, Paris, Amsterdam and Zurich. Ljubljana wasn’t mentioned in the report.
Moscow is among the cities where UBS considers the real estate market to be overvalued. Moreover, back in 2018, the bank called the price of housing in the city objective. If in 2018 Moscow’s assessment was only 0.07, then in 2020 it increased to 0.66 – an increase of more than nine times. UBS experts also consider the overvalued market in Vancouver, London, Tokyo, Los Angeles and Stockholm. And in New York, the risk of a “bubble” is even lower than in Moscow – an estimate of 0.56.
The reasonable level of prices, according to the bank, is in Boston, Singapore, Madrid, Warsaw, Milan and Dubai. Moreover, prices are falling only in Madrid, San Francisco, Dubai and Hong Kong. Undervalued real estate in Chicago. The most inaccessible cities for home purchase, where it will take more than 10 years to buy a home, are Paris, London, Singapore, Tokyo, Tel Aviv and New York.
The real estate market is weathering the coronavirus relatively well, with home price increases this year even accelerating, UBS noted. One of the main trends is that people have begun to change their preferences in choosing housing: because of the widespread remote work, life in the suburbs is becoming more attractive, as opposed to expensive city centers.
The risk of “bubbles” rises during the pandemic as prices continue to rise despite warning signals, Bloomberg quoted the UBS report as saying. The rise in prices was caused by state support for household income and the real estate market, along with low key rates and the suspension of bankruptcies, the bank said. “The current acceleration is obviously unstable. The rent is already falling in most cities, which means, probably, there will be a stage of correction, when subsidies will stop, and the pressure on household incomes will increase, “Bloomberg reports.
UBS advised investors to consider selling real estate in cities with an overheated price per m2 and to explore other investment opportunities that will bring more income.