Finding The Froth In Global Property Market - UBS Report

Jackie Bennion

1 October 2019

The German city of Munich is the most overvalued property market in the world followed by Toronto, Hong Kong, and Amsterdam, according to the Global Real Estate Bubble Index 2019 report by the countrywide average. Similarly, affordability issues, trade tensions and diminishing foreign demand have capped price growth in San Francisco and Los Angeles for now. Boston is still in fair value territory and benefits from the appeal of the region for businesses and high-income earners. Chicago is undervalued but continues to lag far behind given its increasing fiscal challenges."
APAC
"The momentum in Hong Kong's red-hot property market has stalled. The weaker economic outlook has cooled residential buyer sentiment. However, the market remains firmly in bubble risk territory. By the end of the first quarter of 2019, prices in Sydney were 15 per cent lower than at the peak, and credit growth for housing had reached an all-time low. Singapore's brief housing boom between mid-2017 and mid-2018 is over. Regulatory measures cap price growth expectations and keep the market in fair-valued territory."
Middle East
“Over the last 30 years, Tel Aviv has seen some of highest price growth among the cities we cover in this report. Prices rose nearly constantly between 2003 and 2017. An increase in mortgage rates triggered a correction. Recently, prices have mostly stabilized, but the city is still in overvalued territory. Dubai's house prices are highly volatile. Since the last peak in 2014, prices have fallen by almost 35 per cent and the index value has declined sharply. Prices are expected to find a bottom soon. The market is in fair value territory.”

"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," Mark Haefele, chief investment officer at UBS Global Wealth Management, said.

The report urged investors to remain "cautious when considering housing markets in bubble risk territory." Lead author and head of Swiss real estate investments at UBS, Matthias Holzhey, said: "Regulatory measures to curb further appreciation have already triggered market corrections in some of the most overheated cities." He noted that real prices in all four top-ranking cities in the 2016 edition of the Index have fallen. "On average, they are down by 10 per cent from their respective peaks, and we don't see this trend reversing," he added.