The Swiss bank UBS notes significant imbalances in the real estate market in large cities.
The real estate boom is “regarding to end”, according to a study published on Wednesday by the Swiss bank UBS, which notes significant imbalances in the real estate market in major cities such as Frankfurt in Germany and Toronto in Canada. . The Swiss bank publishes an annual housing bubble index that analyzes residential real estate prices in 25 major cities around the world.
Since its last study published in October last year, prices have still increased by almost 10% on average in the cities studied, i.e. “the highest annual growth rate since 2007”, underlines the bank in a press release, estimating that “prices are disconnected from rising interest rates”.
With the rise in real estate, the living space that a highly qualified employee working in the tertiary sector can afford has shrunk on average by around a third compared to the period before the Covid-19 pandemic. , illustrate the economists of the Swiss bank.
Paris, the least accessible city
The cities with the most characteristics of a speculative bubble are Toronto and Frankfurt, followed by Zurich, Munich, Hong Kong, Vancouver, Amsterdam, Tel Aviv and Tokyo, where the risks are also high. Paris, Stockholm and Sydney appear overvalued, even if prices have stagnated or already fallen there, note economists at UBS.
“Inflation and asset losses resulting from the current turmoil in financial markets are reducing household purchasing power,” said Claudio Saputelli, head of real estate in UBS’s wealth management division, quoted in the press release, which notes that “real estate is becoming a less attractive investment”. “Because in many cities, the costs of debt exceed the returns on investments for a property intended for rental,” he explains.
For now, the labor market remains solid, which continues to support the real estate market, but the trend might also deteriorate with the deterioration of economic conditions looming, the bank also warns. In Paris, nominal real estate prices have stagnated compared to the study carried out last year and the French capital is no longer considered to present a risk of a speculative bubble. Despite this, Paris remains the least accessible city of all the eurozone cities surveyed, according to UBS economists
