The Real Deal New York

New York City not in danger of housing bubble: UBS

Vancouver, London top list of cities at risk

September 29, 2016 07:30AM

UBS Real Estate Global Index

UBS Real Estate Global Index (click to enlarge)

Vancouver and London topped a list of cities most at risk of a housing bubble, according to UBS Group’s Bubble Index, which charts the housing markets in 18 major cities. New York’s housing market, on the other hand, was ranked in the “fairly valued” category, grouped with Boston and Singapore.

The most overvalued housing market in the U.S. according to UBS, is in San Francisco, where real prices have increased by more than 50 percent since 2011, compared to a national average of about 15 percent.

New York’s market rebounded since 2010 but the upward trend has recently stalled, particularly at the oversaturated top end of the residential market, according to the analysis. Nevertheless, with rents more than 50 percent higher than they were a decade ago, New York remains one of the most expensive cities in the world.

This is true for most of the global cities on the list, where valuation and affordability are not necessarily related. In most, buying a 645-square-foot apartment is unaffordable for the average skilled-service worker.

Across Europe, where low interest rates have caused urban housing marketings to overheat, all but one of the cities in the survey — Milan — were overvalued, with London, Stockholm and Munich in the near-bubble category. Valuations in Zurich, Paris and Geneva are also stretched to a lesser degree, according to USB’s analysis.

Vancouver, at pop-level valuations, has seen housing prices double in the past decade, largely driven by foreign investment. Sydney, also at risk of popping, has seen inflated prices due to heavy Chinese real estate investment. [Bloomberg]Chava Gourarie