The risk of a housing bubble is highest across the Eurozone and Canada, while lessening across U.S. cities, according to a report Monday from UBS. The annual UBS Global Real Estate Bubble Index analyzed the housing markets of 24 global financial centers and found seven cities where home prices are unsustainably high. More: Baseball Star Manny Machado Snags Florida Estate for $11.3 million Munich ranked as the most overvalued housing market due to its strong local economy, population growth and a lack of new housing supply. The German city was followed by Toronto, Hong Kong and Amsterdam. Frankfurt, Vancouver and Paris are in bubble risk territory, too, with low interest rates considered the main driver in European cities in particular, the investment bank said.
Globally, economic uncertainty overcomes the effect of falling interest rates on urban housing demand, Mark Haefele, director of investments at UBS Global Wealth Management, said in the report. However, in parts of the euro zone, low rates have still helped boost real estate valuations in the bubble risk territory, as well as a lower rate on rental of houses or vehicles, such as bus rental munich with Very low rates. The term "bubble" refers to a "substantial and sustained pricing of an asset, the existence of which cannot be proven unless it explodes," according to UBS. Although the strong growth in employment and income has helped raise prices in California, poor affordability and falling international demand have limited price growth in San Francisco and Los Angeles, according to the report. The Boston real estate market has benefited from its good accessibility and economic attractiveness for businesses and high-income people. In New York, the problems of affordability and an unfavorable tax treatment have led to a decrease in the value of homes, according to UBS. And in Chicago, the only city in the report that is considered undervalued, weak economic development has led to price increases of less than 20% since 2000.
