These are the world's biggest property bubbles as ranked by UBS

[Sun Belt]

These are the world's biggest property bubbles as ranked by UBS
David Reid | CNBC
Thurs. Sept 27, 2018

Housing prices in Hong Kong are the most overvalued and at the greatest risk of collapse, according to a report focused on 20 major cities.

UBS Group's Global Real Estate Bubble Index puts Munich, Toronto, Vancouver, London and Amsterdam alongside Hong Kong as cities currently in property bubble territory.

"Major imbalances" are also found in Stockholm, Paris, San Francisco, Frankfurt and Sydney, the report said.

Los Angeles, Zurich, Tokyo, Geneva and New York are merely deemed overvalued, while Chicago is the only city included in the list that is viewed as undervalued.

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Both Toronto and Vancouver are considered by UBS to be in bubble territory. The bank noted that higher stamp duties on foreign buyers have done little to curb the boom in prices in Vancouver but do look to have checked real estate appetite in Toronto.

https://www.cnbc.com/2018/09/27/ubs-...rash-risk.html



Much more information here:
https://www.ubs.com/global/en/wealth...ndex-2018.html

Years to afford a 60m2 flat in Hong Kong only 22 years
London: 15 years
Milan: 6 years
Chicago: 3 years

Beware of rising interest rates, they have been the trigger for major corrections in the past. Cheers!

[The North One]

How did Hong Kong get like this? Everyone has been saying Vancouver is gonna crash for a while now. I don't think Toronto is in a bubble.

[Crawford]

Munich is rarely talked about, yet crazy expensive right now. It's a relatively minor city, rather provincial, wealthy and prosperous, but still.

Not sure if I agree with their business rules, though. Very simplistic and misleading. Just because City A has a higher home price to income ratio than City B doesn't mean it's more overvalued. There are like a billion other factors.

[10023]

^ This.

It’s a silly methodology because property prices in central London, NYC, Hong Kong, etc have nothing to do with incomes in these cities.

Even if one isn’t talking about property as a speculative or secure financial investment, these cities are destinations where the global wealthy will own a home for when they’re in town. I would venture to guess that most of the world’s 2,200 or so billionaires own at least one Manhattan apartment, for instance.

[10023]

Munich is so expensive because it’s probably now the wealthiest and most desirable city in Germany, but the historical core is quite small. And because the Western world has not built a single new great urban neighborhood since the early 20th century, that limits the more desirable supply.

[mousquet]

Originally Posted by 10023

And because the Western world has not built a single new great urban neighborhood since the early 20th century, that limits the more desirable supply.

I have to disagree on that point of yours, though.

Hopefully you noticed we've been clearly done with Le Corbusier's insane fascistic/communist views for a pretty long while by now, then here in Paris and in France as a whole, masterplans like Rive Gauche in the 13th arrondissement turn out some fine urban planning.

Only, they feature contemporary architecture instead of ancient neo-classical trends, which you may dislike.
That's only a matter of taste as far as textures and design go. But it doesn't mean planning itself would be bad at all.

It is actually good over Rive Gauche where a square meter must sell for €10k on average. That's surely not the average price of a urban failure.
I think Le Corbusier is generally much cheaper. Lol

[10023]

Originally Posted by mousquet

I have to disagree on that point of yours, though.

Hopefully you noticed we've been clearly done with Le Corbusier's insane fascistic/communist views for a pretty long while by now, then here in Paris and in France as a whole, masterplans like Rive Gauche in the 13th arrondissement turn out some fine urban planning.

Only, they feature contemporary architecture instead of ancient neo-classical trends, which you may dislike.
That's only a matter of taste as far as textures and design go. But it doesn't mean planning itself would be bad at all.

It is actually good over Rive Gauche where a square meter must sell for €10k on average. That's surely not the average price of a urban failure.
I think Le Corbusier is generally much cheaper. Lol

You’ll have to show me what you mean, though I am generally not a fan of new urban master plans, no. Even something like the Hudson Yards development in NYC is only nice to view from a distance. Up close and within the site, it’s overscaled and impersonal.

And these are not really “new” urban neighborhoods, anyway. Nothing in the city proper (20 arrondissements) of Paris is really “new”. It’s just infill, even if it takes up 100 acres.

I’m not talking about new buildings in old neighborhoods. It’s not a comment on the architecture. And I’m also not talking about prices per square foot. Plenty of people like suburbia too, and there are suburbs that command high prices. I’m saying that new neighborhoods can never be substitutes for old neighborhoods, and so we are unable to expand the limited supply of a certain product. Places like the Marais or West Village or Mayfair will continue to get more and more expensive because nothing like them will ever be built again.

[dc_denizen]

1.Vancouver

2.Everywhere else

[Sun Belt]

Originally Posted by 10023

^ This.

It’s a silly methodology because property prices in central London, NYC, Hong Kong, etc have nothing to do with incomes in these cities.

Even if one isn’t talking about property as a speculative or secure financial investment, these cities are destinations where the global wealthy will own a home for when they’re in town. I would venture to guess that most of the world’s 2,200 or so billionaires own at least one Manhattan apartment, for instance.

Here's what UBS had to say about London:

Originally Posted by UBS

The UBS Global Real Estate Bubble Index score for London declined for the second straight year but remains in the bubble-risk zone. Overall, inflation-adjusted prices are more than 10% higher than in 2007, when the last bubble burst, while rents have stayed roughly stable and real incomes have gone down by 10%.

House prices in London have lagged the nationwide average and dropped by 5% in inflation-adjusted terms since mid- 2017. The relative weakness of the city’s housing market can be attributed to a few causes. First, housing remains unaffordable for London’s citizens. Buying a 60m2 (650 sqft) flat near the city center costs 15 yearly incomes, which means that government programs to help first-time buyers are less effective in London than elsewhere in the country. Second, the prime segment is hurt by higher stamp duties for luxury and buy-to-let properties. Third, inflation continues to erode the purchasing power of local residents. So market weak- ness was more pronounced in the prime boroughs.

From the perspective of foreign investors, house prices in USD terms have fallen by 10% since 2015 and could consti- tute an attractive buying opportunity. We expect prices to stabilize but still advise caution given high market valuations and marked political uncertainty.

[Sun Belt]

Originally Posted by dc_denizen

1.Vancouver

2.Everywhere else

From UBS:

Originally Posted by UBS

Vancouver
Imbalances increased again as house prices rose in the past four quarters at a double-digit rate in real terms. Real prices have doubled in 12 years. The imbalances are mitigated somewhat by income growth and above-average rental growth of 5–7% in nominal terms over the last four quarters. As the government tries to contain speculation, the tax burden is rising for high-end property buyers and foreign purchasers. The already strained affordability will become an acute issue if mortgage rates rise further, one that may halt the local market boom.

[333609543]

Vancouver is most certainly a bubble, one would have to drop a hefty sum just to gain an empty lot, and even heftier sums for built homes on those lots. I remember seeing an article where a burned down home cost the buyer of the land 3-4 million dollars (this coild have been sensationalized).

Toronto is restricted mostly by its greenbelt (Van has one too but generally the land on that greenbelt is very productive), Toronto's greenbelt is massive and if the current government decides it wants to relinquish that land (or just small portions) I believe prices would go down somewhat in relation to how much land no longer has greenbelt status. If prices don't drop then a bubble will be evident.

I know London has a greenbelt as well, not too knowledgable on London's greenbelt or urban fabric in general so I won't comment.

[10023]

Originally Posted by Sun Belt

Here's what UBS had to say about London:

Yeah, none of that is insightful or new information.

Comparing house prices in central London to average incomes is meaningless. People with average incomes don’t live in market rate housing in central London, whether rented or owned. The same is true for all the world’s most expensive cities. The most desirable parts of town aren’t for average people.

If anything it would be more interesting to compare prices to incomes in the 90th to 99th percentile range. The top 10% by income, excluding the top 1%. That captures the professional/managerial class - the bankers, the lawyers, the inventors, the partners at other professional services firms, the VP+ corporate management, etc. That’s who needs to be able to afford center city real estate for the market to be sustainable.

[10023]

Originally Posted by 333609543

I know London has a greenbelt as well, not too knowledgable on London's greenbelt or urban fabric in general so I won't comment.

London does have a greenbelt, and there are those (generally on the left) who believe it should be built on to create housing, which would be a tragedy.

[mhays]

Originally Posted by 333609543

Vancouver is most certainly a bubble, one would have to drop a hefty sum just to gain an empty lot, and even heftier sums for built homes on those lots. I remember seeing an article where a burned down home cost the buyer of the land 3-4 million dollars (this coild have been sensationalized).

Lots of Vancouver houses are purchased to be torn down and replaced. The burned example was simply the same thing....but easier.

[dimondpark]

Originally Posted by 10023

Comparing house prices in central London to average incomes is meaningless. People with average incomes don’t live in market rate housing in central London, whether rented or owned. The same is true for all the world’s most expensive cities. The most desirable parts of town aren’t for average people.

I totally agree, but think once the average income isnt enough for average and below average areas, we see the mess happening in the Bay Area-folks moving 100+miles away from their jobs and then sitting in 4-6 hours of traffic a day.

[Doady]

The Vancouver urban area is directly bordered by ocean to the west, mountains to the north, the USA to the south, and farmland representing 65% of British Columbia's agricultural output to the east. Don't expect the prices to go down very much, if at all.

[10023]

Originally Posted by dimondpark

I totally agree, but think once the average income isnt enough for average and below average areas, we see the mess happening in the Bay Area-folks moving 100+miles away from their jobs and then sitting in 4-6 hours of traffic a day.

And that’s a point for discussion in a different thread. It has absolutely nothing to do with the question of whether a property bubble exists.

[Pedestrian]

Originally Posted by mhays

Lots of Vancouver houses are purchased to be torn down and replaced. The burned example was simply the same thing....but easier.

In San Francisco, it's easier if it's burned down. In fact, I suspect more than a few fires are arson by the property owner. The most amazing, ridiculous things give a piece of real estate "architectural importance" and protect it from demolition, at least without a years-long battle with the city bureaucracy, NIMBYs and the courts. If it "happens to" catch fire before or during all this, its good news for the would-be new home builder.

[dc_denizen]

Originally Posted by Doady

The Vancouver urban area is directly bordered by ocean to the west, mountains to the north, the USA to the south, and farmland representing 65% of British Columbia's agricultural output to the east. Don't expect the prices to go down very much, if at all.

scarcity of land has very little to do with Vancouver’s price bubble.

[Innsertnamehere]

It's Vancouver's strict housing policies that have made it such a desirable place to live that also restricts supply while driving demand even higher. The city is honestly ridiculously beautiful with arguably the nicest climate in Canada, many Canadians would move there if they could afford it... but part of keeping it beautiful is restricting supply, especially low rise supply. Having a detached home is a serious luxury as they account for a very small percentage of housing stock compared to other North American cities.