Zurich moves into the bubble zone
The UBS Global Real Estate Bubble Index sees significant overvaluations of residential properties for half of the major cities assessed there. For seven cities, including Zurich, the analysts see a bubble risk. In Geneva, too, the prices on the housing market are too high.
UBS explains in a press release on the current edition of the UBS Global Real Estate Bubble Index that the euro area has the most overvalued housing markets of the 25 cities observed around the world. For Munich, Frankfurt, Toronto, Hong Kong, Paris, Amsterdam and Zurich, the analysts even identify a bubble risk. Overvaluations of residential real estate are attested in the cities of Vancouver, London, Tokyo, Los Angeles, Stockholm, Geneva, San Francisco, Tel Aviv, Sydney, Moscow and New York.
This year, Zurich has risen to the bubble risk category for the first time, the analysts explain in the press release. You have also observed the strongest price increase of all Swiss economic regions for the metropolis. The supply on the housing market grew relatively quickly in the reporting period. If, according to the announcement, the market for owner-occupied properties has dried up, the majority of the newly built apartments will ultimately be rented out.
The analysts put Geneva at a lower price level and a lower index value than Zurich. However, the city made up for its losses from 2013 to 2016 in the wake of the recent price hike. Despite the overvalued housing market, the city can benefit from its international orientation and its attraction to foreign nationals.
Compared to last year's Bubble Index, prices in many European metropolises have risen by more than 5 percent, the press release explains. "At this point in time it is impossible to say to what extent higher unemployment and a bleak outlook for household incomes will affect house prices," said Mark Haefele, chief investment officer at UBS Global Wealth Management, quoted there. "It is clear, however, that the current acceleration is not sustainable in the short term."