Recent research indicates a significant downturn in housing prices in the world’s top 25 cities over the past year, with only Zurich and Tokyo bucking the trend, according to a study conducted by Swiss bank UBS. The latest ‘Global Real Estate Bubble Index,’ examining the largest 25 cities globally, reveals an average 5% decrease in real housing prices, suggesting that this trend is likely to persist.
The price adjustments mentioned in the report have substantially reduced the risk of a real estate bubble in cities that were severely impacted during the 2008 financial crisis. According to the report, only Zurich and Tokyo remain in the “bubble risk” category out of the nine cities that were in this category last year. Frankfurt, Munich, and Amsterdam have shifted to the lower-risk “overvalued” category in Europe. Geneva, London, Stockholm, and Paris continue to stay in the same category.
UBS notes a decrease in housing market imbalances, attributing the overall decline to the current economic climate, which has witnessed a global increase in inflation and interest rates over the last two years due to Russia’s occupation of Ukraine and the Covid-19 pandemic.
The most significant decline, according to UBS, occurred in Frankfurt and Toronto, with prices dropping by 15% in both cities. These two cities had the highest risk scores in UBS’s report last year. The authors of the report stated, “Low financing costs have been the lifeblood of global real estate markets over the past decade, propelling housing prices to dizzying levels.”
UBS predicts that real housing prices in the 25 cities they analyzed have dropped an average of 5% from mid-2022 to mid-2023 and anticipates further declines. While cities like Paris and London experienced price corrections, the decrease has not significantly improved access to housing. UBS points out that in these cities, purchasing a 60-square-meter home still equates to a 10-year salary for a qualified worker in the service sector.
Considering the current high levels of interest rates, UBS suggests that even if the housing shortage improves, further price decreases are probable. We will continue to closely monitor these changes in the housing market. Stay tuned to our blog for detailed information and updates on this evolving situation!