The risk of bubbles in homes in Zurich is high
Frankfurt, Toronto and Hong Kong top the global home bubble risk index. But UBS also considers Munich and Zurich to be severely overvalued. The big bank also sees strong imbalances in Geneva.
The global bubble risk for homes rose by 6 percent on average in the major cities analyzed last year. In all of the cities analyzed except Milan, Paris, New York and San Francisco, home prices have risen, in five cities even by double digits. The potential extent of a price correction has also increased. This is shown by the UBS Global Real Estate Bubble Index 2021 . This annual study is prepared by the Chief Investment Office of UBS Global Wealth Management .
The current risk of the real estate bubble bursting is highest in Frankfurt, Toronto and Hong Kong. According to a comprehensive media release , there are also high risks in Munich and Zurich. Vancouver, Stockholm, Amsterdam and Paris are just as overrated, as are all five cities from the USA examined. UBS also sees major imbalances in Geneva, Tokyo, Sydney, London, Moscow, Tel Aviv and Singapore.
Madrid, Milan and Warsaw, on the other hand, are still rated fairly. UBS names Dubai as the only undervalued market. He’s also the only one to be classified in a lower category than last year.
According to UBS, the reasons for the global price increase lie in addition to the corona pandemic in the further improved financing conditions. In some cases, even the lending standards for homebuyers have been relaxed. In addition, higher savings rates and growing stock markets have released additional equity.
At the same time, households would have to take out ever larger loans in order to keep up with rising prices. Even so, debt levels and credit growth are still well below their historical highs in many countries. UBS therefore does not expect any major disruptions on the global financial markets for the time being. The shift in demand towards non-urban areas, however, makes “a long dry spell for the urban housing markets” more likely.