UBS Global Real Estate Bubble Index 2018

Identifying a bubble

Price bubbles are a regularly recurring phenomenon in property markets. The term “bubble” refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts. The UBS Global Real Estate Bubble Index gauges the risk of a property bubble on the basis of such patterns.

Where is the greatest bubble risk in 2018?

Bubble risk appears greatest in Hong Kong, Munich, Toronto, Vancouver, London and Amsterdam. Major imbalances also characterize Stockholm, Paris, San Francisco, Frankfurt and Sydney.

This year's study highlights increasingly strained affordability. Buying a 60m2 apartment in most world cities exceeds the budget of most people who earn the average annual income paid in the highly skilled service sector.

Prices continue to soar, but in half of the cities in the study, housing markets are booming with inflation-adjusted prices rising at least 5% in the last four quarters. However, in the other half of the cities house prices were stalling or declining.

35% increase in house prices in last 5 years

Over the course of the last five years, house prices in major cities have increased by 35% on average.

First cracks have begun appearing

Prices slip into the red: house prices declined in half of last year’s bubble risk cities.

22 years of working to afford a flat in Hong Kong

You need to work 22 years to afford a 60m2 flat in the Asian metropolis. Ten years ago it was just 12 years.

Source UBS
* Uncertainty range due to differing data quality

We consider where you need to work the longest to buy a flat

If you're looking to buy a flat, the UBS Global Real Estate Bubble Index provides a good indication of price-to-income levels. Hong-Kong has the highest price-to-income ratio, followed by London, Paris and Singapore. If you dream of days eating pasta, you will need to work 6 years to afford a 60m2 flat in Milan. Or if a cup of tea is more of what you fancy, you'll have to work over 15 years to afford the same size flat in London.