We love stating the obvious
A recent study by UBS has found that the housing markets in the majority of the global cities they have studied are overvalued with some even at risk of a housing bubble, reports CPI Financial.
London and Hong Kong have been pinpointed as most at risk of a housing bubble, with the former sporting house prices that are 6 percent above their 2007 peak, in real terms. Hong Kong is also the world’s most unaffordable property market, per UBS.
“Foreign demand and demand deriving from safe-haven seekers largely explain current valuations. Global geopolitical risk and the high property valuations in Asian cities have helped to propel London house prices to new heights,” UBS stated.
Other European cities overvalued are Amsterdam, Geneva, Zurich and Paris, with Frankfurt deemed “on a rising trajectory in overvalued territory.”
Outside of Europe, Sydney, Vancouver and San Francisco are significantly overvalued, according to the UBS report, with Tokyo and Singapore beyond fair valuation too.
After London and Hong Kong, Sydney was dubbed by UBS as the world’s most overvalued, chiming with the accounts of many global financial experts over the past few months who have observed how the Australian city’s house prices have recently overtaken London thanks to record low interest rates.
“A mix of optimistic expectations, favorable economic fundamentals and capital inflows from abroad has caused valuations to soar in certain cities in recent years. Loose monetary policy has prevented a normalization of housing markets and encouraged local bubble risks to grow,” commented Claudio Saputelli, head of global real estate at UBS.
The UBS report is consistent with research by the Economist, who tracks housing data in 26 of the world’s most notable markets. Its latest research has found that prices are rising at an average rate of 4.7 percent in 21 of these markets with just five countries showing decline, namely China, Singapore, France, Greece and Italy.
They deem the housing market over 30 percent overvalued in six key markets, including Australia, the UK and Canada.
The Bank for International Settlements has also pinpointed sharply rising residential prices in some of the world’s emerging markets – specifically, India, Turkey, Thailand, the Philippines and Hungary.
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