Every year, UBS, a multinational investment bank, financial services and wealth management company, ranks cities around the world in its UBS Group’s Global Real Estate Bubble Index.
Obviously, no city wants to win as the “most overvalued” but this year, Hong Kong did.
UBS’s ranking system looks at the most overvalued and undervalued cities through a point system lens.
- Bubble risk = any score over 1.5
- Overvalued = any score between 0.5 and 1.5
- Fair Valued = any score between 0.5 and -0.5
- Undervalued = any score between -0.5 and -1.5
(UBS found a “…widespread breadth of rising property prices in major cities…” to the tune of +35% over the last 5 years.)
Hong Kong was considered to be the most extremely “at risk of collapse” city in the world. Home prices have risen at an annual rate of nearly +10% since 2012. The government may soon tighten restrictions on foreign, non-local homebuyers but so far, any measures already in place have not cooled real estate prices.
Chicago is the only undervalued city on UBS’s list of 20 global cities as measured by this Index.
Take a look:
Hong Kong 2.03
Munich 1.99
Toronto 1.95
Vancouver 1.92
Amsterdam 1.65
London 1.61
Stockholm 1.45
Paris 1.44
San Francisco 1.44
Frankfurt 1.43
Sydney 1.29
Los Angeles 1.15
Zurich 1.10
Tokyo 1.09
Geneva 0.68
New York City 0.68
Boston 0.45
Singapore 0.44
Milan 0.03
Chicago -0.62
According to this UBS Index, bubble risks for US cities sit below 2006 peak values.
Mark Haefele, chief investment officer with UBS Global Wealth Management said, “Although many financial centers remain at risk of having housing bubbles (meaning – substantial and sustained mispricing due to ‘a decoupling of prices from local incomes and rents’ and/or excessive constriction/bank lending), we should not compare today’s situation with pre-crisis conditions.”
