Key Highlights

  • New report from UBS Group indicates seven international cities at risk for “imminent” housing market crash
  • At risk housing markets are those plagued with sky-high prices and low inventory
  • At risk markets include Toronto, Frankfurt, Munich, Hong Kong, Paris, Zurich and Amsterdam

Global pandemics do not discriminate based upon location. Every place is prey to pandemic disease and the economic impacts of that disease.

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The UBS Group just released its annual “Real Estate Bubble Index” and according to that Index, seven cities around the globe are considered to be most at risk of a major housing bubble crash. Amazingly, no US city landed on this ominous list despite many US cities having experienced skyrocketing housing prices in the past decade.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said, “It’s clear that the (housing price) acceleration over the past four quarters is not sustainable in the short run. Rents have been falling already in most cities, indicating that a correction phase will likely emerge when subsidies fade out and pressure on incomes increase.”

Here are the seven cities considered to be most at risk of a crash, according to the UBS Group “Real Estate Bubble Index”:

  1. Munich, Germany – An international magnet for tourists and workers alike, Munich’s real estate prices have been unprecedented over the last decade. With tourism and entertainment industries essentially at standstill, housing prices likely to drop.
  2. Frankfurt, Germany – As a European business hub, Frankfurt, like Munich, has seen housing prices more than double over the last decade.
  3. Toronto, Canada – Canada’s largest city, Toronto’s high prices, high rents, and high densities have become unsustainable. The COVID pandemic has accelerated diminished demand for the inner city and increased demand in the suburbs.
  4. Hong Kong – Home prices in Hong Kong are now +50% higher than they were 10 years ago. Its real estate market is known for its inaccessibility. Even high earners are renters. UBS believes this market is due for a sharp correction in the near future.
  5. Paris, France – As one of the world’s most beautiful and interesting cities, housing prices in Paris, like Hong Kong, have gone through the roof. Additionally, Paris is highly dependent upon tourism.
  6. Amsterdam, The Netherlands – According to the UBS report, “Paris and Amsterdam closely follow suit…” Both cities are highly dependent upon tourism and both are limited by their respective tiny geography.
  7. Zurich, Switzerland – Due to its status as an economic and European business hub, Zurich has seen the highest growth in real estate prices in all of Switzerland. Though not affected by COVID, the pace of Zurich’s housing price growth places it among UBS’s overvalued markets similar to Hong Kong.

Additionally, UBS considers the following housing markets to be overvalued:

  • Vancouver
  • San Francisco
  • Los Angeles
  • New York
  • London
  • Geneva
  • Stockholm
  • Moscow
  • Tel Aviv
  • Sydney
  • Tokyo

 

Thanks to InmanNews and UBS Group “Real Estate Bubble Index.

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