After Toronto, the risk of a real estate bubble is highest in Frankfurt am Main, Zurich and Munich. This is the result of a study by the major Swiss bank UBS. In Frankfurt am Main, real estate prices have more than doubled in nominal terms, according to UBS. Between mid-2021 and mid-2022, however, growth in the two cities was only around 5 percent. UBS, the major Swiss bank, also expects the "exaggerated highs on the market to come to an end" in 2023.
UBS assumes that there is a risk of a real estate bubble if the inflation-adjusted price growth rate exceeds 1.5 percentage points. In the 25 major cities surveyed, according to the UBS Global Real Estate Bubble Index, the figure is currently 2.24 in Toronto, 2.21 in Frankfurt am Main, 1.81 in Zurich and 1.80 in Munich. The cities of Hong Kong (1.71), Vancouver (1.70), Amsterdam (1.62), Tel Aviv (1.59) and Tokyo (1.56) also have a bubble risk.
A real estate bubble occurs when demand for real estate initially increases and, as a result, prices for it also rise. At a certain point, however, demand for real estate stops growing. Put simply, this is the case, for example, when every interested party now owns a property or is not prepared to pay an exorbitant price for one. Then the real estate bubble bursts: demand for real estate falls and prices also decline.
Source: ubs.com/wavepoint
© Photodune
