The UBS Global Real Estate Bubble Index analyses residential property prices in 25 major cities around the world. In this year’s edition, we discuss the housing markets of some of the cities on the list, the impact of the coronavirus pandemic and its potential long-term adverse effects on urban housing.

How does COVID-19 impact property markets?

The housing markets appear to be weathering the coronavirus relatively well. Remarkably, house price growth has accelerated this year. But the pandemic seems to be making some reconsider where to live. The rise of the home office and pressure on household incomes in the light of already barely affordable city apartments make living in the suburbs an attractive alternative. Taking these factors into account, some adverse longer-term effects on urban housing demand are likely.

Global Real Estate Bubble Index

Where are the greatest bubble risks in 2020?

Use our interactive Global Real Estate Bubble Index to track and compare the risk of bubbles in 25 cities around the world over the last three years. Munich and Frankfurt top our list in 2020. Risk is also elevated in Toronto, Hong Kong, Paris, and Amsterdam. Zurich is a new addition to the bubble risk zone.

 

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Key takeaways from this year’s bubble index

Singapore Real Estate

Home prices in Singapore have increased only slightly over the last two years, and they’ve treaded water in 2020 during the recession that has resulted from the pandemic. Attractive mortgage rates, balanced market fundamentals, and resilient demand should limit the downside.

Zurich Real Estate

In Zurich, the willingness of potential home buyers to pay will likely decrease in the city center over the next few quarters. If the economy remains in crisis mode for a longer period, the high prices in the Swiss owner-occupied home market will eventually be unsustainable.

New York Real Estate

New York is a truly global city and should stay relatively attractive to wealthy investors beyond COVID-19. That said, homeowners are very likely to see an adverse impact on property values from the pandemic for the foreseeable future.

Investing in real estate

Investing in real estate

  • Housing is a key Longevity asset and, to some degree, an investment good. However, as an illiquid bulk holding, housing is not usually seen as part of the financial asset allocation. 
  • Homeownership typically comes with leverage. If the loan-to-value ratio is not excessive and the household has sufficient financial reserves, a home can serve as collateral for long-term financial investments. Long-term mortgages can also mitigate the interest rate risk.
  • First-home buyers should build up wealth with a focus on relatively liquid assets and seek to diversify their balance sheet.
  • The prospects for buy-to-let investments in many cities have deteriorated. Private real estate solutions are a better alternative in an environment with low yields and rental growth uncertainties.

UBS Wealth Way is an approach incorporating Liquidity. Longevity. Legacy. strategies that UBS Financial Services Inc. and our Financial Advisors can use to assist clients in exploring and pursuing their wealth management needs and goals over different timeframes. This approach is not a promise or guarantee that wealth, or any financial results, can or will be achieved. All investments involve the risk of loss, including the risk of loss of the entire investment.

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