Real estate boom in metropolises around the world: Bubble risk in Zurich too
Zurich – The demand for residential property has been increasing sharply in major metropolises around the world for years. Bubble risks have now formed in many places. Unsurprisingly, Zurich is also one of the world’s most expensive cities.
Homeownership price growth accelerated to an average of six percent from mid-2020 to mid-2021. This is the highest increase since 2014, according to the “UBS Global Real Estate Bubble Index 2021” published on Wednesday, which the big bank has increased in 25 cities and published annually.
UBS has identified urbanization, the corona pandemic, low interest rates, relaxed lending standards for homebuyers and higher savings rates as the causes. In addition, the booming stock markets would have to release additional equity.
Geneva “overrated”
As long as the belief in rising property prices is god-given and interest rates remain low, this development is unlikely to change much, said Matthias Holzhey of UBS on Wednesday at a conference call. “But every boom has its limits.”
As prices rise, so does debt, and with it the risk of a bubble forming. Interest rates are also likely to rise slightly in the future and the relaxed lending criteria will be tightened again. In addition, it ensures higher prices that demand moves from the cities in the cheaper surrounding areas. However, the experts do not expect a stronger correction.
In Switzerland, the cities of Zurich (5th place worldwide) and Geneva (14th place) are the most expensive places. The market in Zurich is overheated, there is a risk of a bubble and Geneva is “overvalued,” said UBS expert Maciej Skoczek. In the short term, no market correction is expected in either city. But if interest rates rise, the inflated prices could erode. In addition, demand is likely to shift to the periphery due to the high prices in the inner cities.
Highest risk in Frankfurt
What is true of Zurich is even more true of other cities. Frankfurt, Munich, Toronto and Hong Kong have the clearest bubble risk. Stockholm, Amsterdam and Paris as well as Vancouver are also among the cities at risk. An immediate price correction is not imminent as long as the urban labor market remains solid and interest rates remain low.
Madrid, Milan and Warsaw remain fairly valued, with Milan and Madrid having been hit hard by the pandemic. The housing market in Inner London has also suffered heavily from the consequences of the pandemic, but is still overvalued.
All of the US cities examined – Miami, Los Angeles, San Francisco, Boston and New York – are in the “overrated” range. There are major imbalances in the housing markets of Tokyo, Sydney, Geneva, London, Moscow, Tel Aviv and Singapore. (awp / mc / pg)