Imbalances in housing markets declined sharply in the past 12 months, according to UBS, driven by macroeconomic factors.
From mid-2022 to mid-2023, real house prices in 25 major cities fell 5 percent on average, according to this year’s edition of UBS Global Real Estate Bubble Index. As a result, only two cities – Zurich followed by Tokyo – were in the «bubble risk» category compared to nine cities a year ago.
«The global surge in inflation and interest rates over the past two years has led to a sharp decline in imbalances in the housing markets of global financial centers on average,» the Swiss bank said, adding that further downside is likely.
APAC Market
Within the Asia Pacific market, Tokyo led in terms of bubble risk, despite declining net immigration and moderately increasing mortgage rates.
While prices in Hong Kong fell 7 percent to inflation-adjusted levels in 2017, the city remained overvalued and has been so since UBS's first edition of the index. Sydney was at the low end of overvalued markets as central bank rate hikes led to a price correction back to inflation-adjusted levels in 2018, though the chance of further downside is limited.
Real prices in Singapore rose 15 percent since 2018 but the city-state is categorized as fairly valued, in part due to a 40 percent rental surge in the same period.
