7 cities around the world most at risk of a housing bubble

  • A report by UBS analyzed price growth in 25 major urban housing markets around the world from the second quarter of 2019 through the second quarter of 2020.
  • Of those markets, 7 are in bubble risk territory, per the UBS Global Real Estate Bubble Index.
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On a global scale, the housing market has shown strength during the coronavirus pandemic, despite the economic downturn. 

A recent report by UBS identified three factors for its resilience.

First, as home prices are a backward-looking indicator of the economy, UBS said they therefore react with a delay to economic downturns. The number of transactions declined in most cities in the second quarter of 2020 compared with the previous year, “complicating price formation and reducing the validity of observed prices.”

Second, the majority of potential home buyers didn’t suffer direct income losses in the first half of 2020, UBS found. “Credit facilities for companies and short-time work schemes mitigated the fallout from the crisis, supporting employees’ housing affordability.”

And third, governments helped homeowners in many cities during the lockdown periods, with increased housing subsidies, lowered taxes, and suspension of foreclosure procedures.

The report analyzed annual house price growth rates in 25 major cities from 2001 through the second quarter of 2020. The markets in the study were Munich, Hong Kong, Zurich, Paris, Singapore, London, Geneva, Frankfurt, Stockholm, Vancouver, Milan, Toronto, Tel Aviv, Sydney, New York, Moscow, Amsterdam, Madrid, Tokyo, San Francisco, Los Angeles, Boston, Warsaw, Dubai, and Chicago.

In 21 of those cities, price growth accelerated over the past four quarters, a trend that USB has called unsustainable. 

In fact, according to the UBS Global Real Estate Bubble Index, seven of the cities in the analysis are in bubble-risk territory. 

Price growth rates recorded in the analysis are adjusted for inflation.

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