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Housing bubbles risk increases significantly in 2017

01 November 17 - RE+D Magazine
Housing bubbles risk increases significantly in 2017

COMPANIES

Solum Property Solutions

Consultant - GREECE

Eurobank Property Services

Consultant - GREECE

PEOPLE

Dimitris Andritsos

CEO of Eurobank Property Services S.A Eurobank Property Services
The UBS Global Real Estate Bubble Index is designed to track the risk of housing bubbles in global financial centers.

 

Bubble risk seems greatest in Toronto, where it has increased significantly in the last year.

Stockholm, Munich, Vancouver, Sydney, London and Hong Kong all remain in risk territory, with Amsterdam joining this group after falling into 'overvalued' territory last year.

Valuations are stretched in Paris, San Francisco, Los Angeles, Zurich, Frankfurt, Tokyo and Geneva as well. In contrast, property markets in Boston, Singapore, New York and Milan seem fairly valued, while Chicago remains undervalued, just as it was last year.

In Hong Kong, even those who earn twice the city’s average income would struggle to afford an apartment of that size.

According to UBS house prices have also decoupled from local incomes in London, Paris, Singapore, New York and Tokyo, where price-to-income multiples exceed 10x.

Unaffordable housing is often a sign of strong investment demand from abroad, tight zoning and rental market regulations.

If investment demand weakens, the risk of a price correction will increase and the long-term appreciation prospects will shrink. In contrast, housing is affordable in Chicago, Boston, Los Angeles, Milan and Frankfurt, which limits the risk of a price correction in these cities.

Due to relatively high incomes, purchasing an apartment is also relatively feasible for residents of San Francisco and most European cities, with the exception of Paris and London.

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