Canadian city Toronto was found to have the highest risk of a housing bubble developing in a recent survey released by investment bank UBS. Other cities at a high risk were Frankfurt, Hong Kong, Munich, Zurich and Vancouver.
In Toronto, housing prices grew by 17 percent over course of the last year. Lowest-ranked Warsaw was in fair-valued territory, according to the report, together with Sao Paulo, Milan and Dubai, where the housing market last crashed in 2018 together with oil prices. The U.S. cities in the ranking stayed below the bubble risk threshold (1.5), but all their markets were classified as overvalued. Miami and Los Angeles were those coming closest to bubble territory at ratings of 1.39 and 1.31, respectively. White collar workers exploring the flexibility of work from home during the coronavirus pandemic caused a (probably temporary) easing of the situation in San Francisco (rank 17) and New York City (rank 20). After unrest and political upheaval in Hong Kong had seen prices deteriorate, bubble risk increased once more in the notoriously pricey city in 2021, before falling again slightly in 2022.
Looking at the ratios of housing prices to rent, housing prices to income, the increase in mortgage payments to the increase of GDP, the increase in construction spending to the increase of GDP and, finally, the ratio of housing prices in the city and the surrounding areas, UBS determined their risk index. Out of 25 cities included in the survey (all of which are known for their high real estate prices), nine were found to be in bubble-risk territory. Twelve more were considered to have an “overvalued housing market”, among them Stockholm, Paris and Sydney as well as Geneva, London and Madrid.