UBS reported an analysis of residential property prices in 25 major cities around the world found that seven cities in Europe, North America, and Asia are in the bubble-risk territory.

The investment banking company’s annual Global Real Estate Bubble Index analyzed the housing markets of 25 major cities around the world and found that five European cities, along with Toronto and Hong Kong, are in bubble risk territory, where home prices are unsustainably high.

Despite the current global recession brought on by the coronavirus pandemic, inflation-adjusted house price growth in the 25 cities, on average, accelerated in the last four quarters, which UBS considers unsustainable.

The eurozone stands out as the region with the most overheated housing markets. Munich and Frankfurt top the UBS Global Real Estate Bubble Index ranking. Bubble risk is also high in Toronto, Hong Kong, Paris, Amsterdam and Zurich.

Eleven cities on the new index are on the overvalued range of the spectrum, including in the U.S., San Francisco, Los Angeles and, to a lesser extent, New York. Boston is among six cities considered fairly valued. Chicago has the distinction of being the only market on the scale that is undervalued.

On average, inflation-adjusted annual price growth rates in the cities analyzed have accelerated in the last four quarters. In many European metropolitan areas, prices shot up by more than 5%, led by Munich, Frankfurt and Warsaw, which was included in the study for the first time.

Price growth in Asia/Pacific and American cities, with the exception of Sydney, remained in a low-to-mid single-digit range. Madrid, San Francisco, Dubai and Hong Kong were the only cities that experienced a decline in prices. The last time fewer cities had negative price growth was in 2006, according to UBS.

The UBS bubble index traces the fundamental valuation of housing markets and the valuation of cities in relation both to their country and to economic distortions — lending and building booms. Tracking current values, the index uses the following risk-based classifications: depressed, undervalued, fair-valued, overvalued and bubble risk.

The average price of an apartment in the city of Buenos Aires is equivalent to 27 years of salary income, according to a survey by the consulting firm Reporte Inmobiliario. The calculation was made by taking an average value of USD 120,000 for a property of 60 square meters and the remuneration of registered private sector workers, reported by the Ministry of Labor for the first quarter of this year.

In this way, Buenos Aires is one of the cities in the world where it takes its inhabitants more years of income to reach the amount necessary to access a property.

According to the UBS Estate Bubble Real Global report prepared by the Swiss Bank UBS, globally, in Hong Kong a 20-year “salary effort” is required to purchase a standard housing unit, while Chicago is only three years. This city in the United States is the one with the most favorable income-to-home values ​​ratio.

Although this global ranking did not include the city of Buenos Aires, the data released by Reporte Inmobiliario allows us to compare the local situation with the rest of the major cities in the world. If these data are added to the list, the Argentine capital would be in the first place, when considering the same variables analyzed by the Swiss bank.

On the other hand, using the sale value of the same 60 m2 unit and crossing this data with the average rental profitability in each city, UBS calculated the number of years that are necessary to amortize the purchase of that home.

In Buenos Aires, it takes 62 years of rent to recover the value, which shows the great fall in profitability that rents have suffered in recent years.

SHOTLIST:

1. Various of new apartments
2. Various of old apartment buildings
3. Various of buildings
4. Various of apartments
5. Various of construction

STORYLINE:

UBS reported an analysis of residential property prices in 25 major cities around the world found that seven cities in Europe, North America and Asia are in bubble-risk territory.

The investment banking company’s annual Global Real Estate Bubble Index analyzed the housing markets of 25 major cities around the world and found that five European cities, along with Toronto and Hong Kong, are in bubble risk territory, where home prices are unsustainably high.

Despite the current global recession brought on by the coronavirus pandemic, inflation-adjusted house price growth in the 25 cities, on average, accelerated in the last four quarters, which UBS considers unsustainable.

The eurozone stands out as the region with the most overheated housing markets. Munich and Frankfurt top the UBS Global Real Estate Bubble Index ranking. Bubble risk is also high in Toronto, Hong Kong, Paris, Amsterdam and Zurich.

Eleven cities on the new index are on the overvalued range of the spectrum, including in the U.S., San Francisco, Los Angeles and, to a lesser extent, New York. Boston is among six cities considered fairly valued. Chicago has the distinction of being the only market on the scale that is undervalued.

On average, inflation-adjusted annual price growth rates in the cities analyzed have accelerated in the last four quarters. In many European metropolitan areas, prices shot up by more than 5%, led by Munich, Frankfurt and Warsaw, which was included in the study for the first time.

Price growth in Asia/Pacific and American cities, with the exception of Sydney, remained in a low-to-mid single-digit range. Madrid, San Francisco, Dubai and Hong Kong were the only cities that experienced a decline in prices. The last time fewer cities had negative price growth was in 2006, according to UBS.

The UBS bubble index traces the fundamental valuation of housing markets and the valuation of cities in relation both to their country and to economic distortions — lending and building booms. Tracking current values, the index uses the following risk-based classifications: depressed, undervalued, fair-valued, overvalued and bubble risk.

The average price of an apartment in the city of Buenos Aires is equivalent to 27 years of salary income, according to a survey by the consulting firm Reporte Inmobiliario. The calculation was made by taking an average value of USD 120,000 for a property of 60 square meters and the remuneration of registered private sector workers, reported by the Ministry of Labor for the first quarter of this year.

In this way, Buenos Aires is one of the cities in the world where it takes its inhabitants more years of income to reach the amount necessary to access a property.

According to the UBS Estate Bubble Real Global report prepared by the Swiss Bank UBS, globally, in Hong Kong a 20-year “salary effort” is required to purchase a standard housing unit, while Chicago is only three years. This city in the United States is the one with the most favorable income-to-home values ​​ratio.

Although this global ranking did not include the city of Buenos Aires, the data released by Reporte Inmobiliario allows us to compare the local situation with the rest of the major cities in the world. If these data are added to the list, the Argentine capital would be in the first place, when considering the same variables analyzed by the Swiss bank.

On the other hand, using the sale value of the same 60 m2 unit and crossing this data with the average rental profitability in each city, UBS calculated the number of years that are necessary to amortize the purchase of that home.

In Buenos Aires it takes 62 years of rent to recover the value, which shows the great fall in profitability that rents have suffered in recent years.

For its part, in the American city of Chicago, total return is achieved at 12 years of age; in Dubai at 16; in Boston at 17; in New York at 26 and in Munich at 39.