The property boom is coming to an end, according to a study published Wednesday by Swiss bank UBS, with Frankfurt and Toronto topping the list of imbalanced markets.
The bank’s annual study of the world property market looked at prices in 25 major cities across the globe.
House prices in the cities analysed rose 10 percent between mid-2021 and mid-2022, said the study — the highest increase since 2007. And of the top five with the fastest-growing prices, four were US cities: Miami, Los Angeles, San Francisco and Boston.
“Imbalances in global metropolitan housing markets are highly elevated and prices are out of sync with rising interest rates,” said the report.
But the cities where there was most risk of the property bubble bursting were Toronto in Canada and the German city of Frankfurt.
“Mortgage rates have almost doubled on average across all cities analyzed since their lowest point in mid-2021,” the report noted.
“Combined with increased real estate prices, the amount of living space that is financially affordable for a skilled service worker is, on average, one-third lower than it was right before the pandemic.”
Other cities in the report’s red zone were Zurich, Munich, Hong Kong, Vancouver, Amsterdam, Tel Aviv and Tokyo.
“Higher interest rates, inflation, turmoil in the financial markets, and deteriorating economic conditions are putting the housing boom under pressure,” said the report.
“In a majority of cities with high valuations, price corrections have either already begun, or are expected to start in the coming quarters.”
The only four cities of the 25 analysed thought to have a fairly valued property market were Milan, Sao Paulo, Dubai and Warsaw.