Where is the RE overestimated ?

Įvardinti pasaulio miestai, kuriuose labiausiai pervertintas NT Photo

The world-famous Swiss bank UBS conducted an annual survey of the cities with the most overvalued real estate (RE). Analysts have singled out those cities around the world where the risk of a "bubble" in the RE market is particularly high. He also mentioned areas where house prices match its value.

The housing market is usually one of the most stable and important elements of any modern economy. The UBS Global Real Estate Index assesses the global real estate market in the long run and monitors the risk of bubbles in cities around the world.

The price bubble, according to UBS, is a recurring phenomenon in real-world markets. The very concept of "bubble" refers to the fundamental and continuous correct determination of the price of an asset, the existence of which can be proven only when the "bubble" bursts.

When assessing cities, the Bank takes into account five factors: the ratio of the price of the object to its income from it, the ratio of the price of the object to its rental price, changes in the mortgage-to-GDP ratio and the construction-GDP ratio, as well as the relative indicator of the value of urban REAL compared to prices in the whole country.

Trends highlighted by the study:

House price growth in the cities of the world analysed accelerated to 6% between mid-2020 and mid-2021. It was the highest double-digit price increase recorded in Moscow, Stockholm, Sydney, Tokyo and Vancouver since 2014. Six of the nine cities at risk of a bubble are in Europe. Meanwhile, no U.S. city has overvalued real estate.

Residents have to take out large loans to cope with high house prices. As a result, the level of home loans has increased significantly in recent quarters.

For the first time since the 1990s, housing in suburban and rural areas is becoming more expensive than in urban areas. The cost-benefit ratio of urban living deteriorated dramatically during the pandemic, as entertainment and shopping became less relevant and offices were abandoned altogether.

Coronavirus restrictions and increased teleworking have led to lower rental prices. In some cities, rents have fallen by double digits.

Cities with the highest risk of a "bubble" in the RE market:

Frankfurt, Germany

Toronto, Canada

Hong Kong

Munich, Germany

Zurich, Switzerland

Vancouver, Canada

Stockholm, Sweden

Paris, France

Amsterdam, Netherlands

UBS analysts have identified only three cities where property prices can be called fair in 2021. These are Madrid, Milan and Warsaw. Dubai has been identified by experts as an undervalued market.


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