3 out of 6 European Cities top the 2016 housing bubble list

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3 out of 6 European Cities top the 2016 housing bubble list

29th September 2016

UBS Global Real Estate Bubble Index 2016

UBS Global Real Estate Bubble Index 2016 (image courtesy of UBS)

The UBS Global Real Estate Bubble Index has just been published and reports that a number of housing markets around the world are seriously overheating, with six at significant risk of being property bubbles. Despite the global financial crisis a few years ago which saw worldwide house prices fall, major markets have once again become overvalued due to low interest rates, a lack of supply and strong demand for housing.

Although Vancouver tops the list, the key European cities of London (2nd), Stockholm (3rd) and Munich (5th) are three of the six at most risk of a major price correction should the bubble burst.

Sydney (4th) and Hong Kong (6th) complete the list, with a further seven cities (San Francisco, Amsterdam, Zurich, Paris, Geneva, Tokyo and Frankfurt) falling into the “overvalued category”, according to UBS.

London has seen price growth in excessive of 10% over the past three years, with prices now 15% above the last peak in 2007. With average wages rising at a significantly lower rate in the same period, the UBS report notes that it would take “a skilled service-sector worker approximately 15 years of average earnings to be able to buy a 60m2 dwelling”.

In Stockholm, property prices have doubled in the past 12 years, with demand constantly outstripping supply. The expected waiting list for a Stockholm rental apartment is now 20 years.

Any bubble is fragile and a correction of the market can be triggered by any number of events, including interest rate rises or external market factors. One thing is for certain; whether the overheated markets experience a sudden correction or gradual cooling, a long term property investment strategy remains a sound investment.

Click here to visit the UBS website