The UBS Global Real Estate Bubble Index 2019 analyzes residential property prices in 24 major cities around the world.

London moves out of bubble risk territory while rivals Paris and Frankfurt enter risk zone for the first time.

House prices in previous hotspots Vancouver and Sydney have fallen sharply.



Zurich, 30 September 2019 – The UBS Global Real Estate Bubble Index 2019, a yearly study by UBS Global Wealth Management's Chief Investment Office, indicates bubble risk or a significant overvaluation of housing markets in half of all evaluated cities.

Bubble risk appears greatest in Munich, followed by Toronto, Hong Kong and Amsterdam. Frankfurt, Vancouver and Paris are in bubble risk territory as well, while major imbalances characterize Zurich, London, San Francisco, Tokyo and Stockholm. Valuations are stretched in Los Angeles, Sydney, Geneva and New York. By contrast, property markets in Singapore, Boston and Milan seem fairly valued while Chicago remains undervalued.

Included for the first time in this year's edition of the index, Madrid, Moscow and Tel Aviv are in overvalued territory while Dubai is fairly priced.

Over the last four quarters, imbalances have soared particularly in the Eurozone, with Frankfurt and Paris the two most prominent new additions to the bubble risk zone when compared with last year. By contrast, valuations in Vancouver, San Francisco, Stockholm and Sydney have fallen sharply. London's property market has cooled down considerably, moving the financial hub out of bubble risk territory for the first time in four years. On the other hand, index scores in New York and Los Angeles are slightly lower than last year while Tokyo and Singapore remain almost unchanged.

Mark Haefele, Chief Investment Officer at UBS Global Wealth Management, said: "On a global level, economic uncertainty is outweighing the effect of falling interest rates on urban housing demand. However, in parts of the Eurozone, low rates have still helped to push real estate valuations into bubble risk territory."

On average, in cities analyzed, inflation-adjusted price increases have practically come to a standstill in the last four quarters. Residential property only appreciated markedly in Moscow, Boston and Eurozone cities. Frankfurt was the only city to see double-digit price increases, which were common globally in previous years. By contrast, there were corrections of over 5 percent over the previous year in Sydney, Vancouver and Dubai.

Claudio Saputelli, Head of Real Estate at UBS Global Wealth Management, said: "The worldwide collapse in interest rates will not come to the housing markets' rescue. Mortgage interest rates in many cities aren't the major challenge for house buyers anymore. Many households simply lack the funds required to meet the banks' financing criteria, which we believe poses one of the biggest risks to property values in urban centers."

Matthias Holzhey, lead author of the study and Head of Swiss Real Estate Investments at UBS Global Wealth Management, said: "Investors should remain cautious when considering housing markets in bubble risk territory. Regulatory measures to curb further appreciation have already triggered market corrections in some of the most overheated cities. Real prices in all four top-ranking cities in the 2016 edition of the UBS Global Real Estate Bubble Index have fallen, for instance. On average they are down by 10% from their respective peaks and we don't see this trend reversing."

Owning residential property in global cities has been a sure road to wealth accumulation. However, the absence of economic viability leads to a deterioration in many cities' attractiveness and favors a shift in jobs to the suburbs. Even though, the underlying factors favoring city properties, including urbanization, the digital revolution and artificial supply constraints, still hold good, real price appreciation can no longer be taken for granted.