Big cities are overrated

UBS Global Real Estate Bubble Index 2020: Zurich moves into the bubble zone


Of all Swiss economic regions, Zurich has recorded the strongest price increases over the past decade. The city's housing market was characterized by a relatively rapidly growing supply. However, the vast majority of the newly built apartments were ultimately rented out. The market for owner-occupied real estate has dried up. The coronavirus crisis has so far left hardly any traces. In fact, the demand for apartments in central Zurich locations has even increased. The high willingness to pay reflects the expectations of further increases in prices as well as persistently high investment demand. The city has therefore slipped into the bubble risk area for the first time.

Both the price level and the index value are lower in Geneva than in Zurich. However, following the recent price hike, the Geneva housing market has offset its losses from 2013-2016. In addition, owning a home remains attractive thanks to low mortgage rates and excessive market rents. The city also benefits from the fact that it is internationally oriented and, despite its limited affordability, continues to attract foreign nationals.


The index values ​​of all analyzed cities in the euro zone have risen in the last four quarters, with the ratings already being the highest in the world. The imbalances continue to grow because of record-low funding costs, which are inconsistent with the strength of local economies. In Frankfurt and Munich, prices have even more than doubled over the past ten years.

London, on the other hand, has the second-weakest price development since 2016 of all the cities analyzed. Nevertheless, the city remains in the overrated area. However, questions of affordability, political uncertainty and a tightening of the tax and regulatory environment continue to put house prices under pressure. It can be assumed that foreign buyers will take advantage of the weaker pound and the drop in prices and thus support the price level in the medium term.

United States

In the cities on the east coast, the index values ​​have been relatively stable over the past five years. The markets on the west coast, on the other hand, were less constant. In Los Angeles, index values ​​continued to rise, while valuations in San Francisco declined due to falling home prices. Overall, US house prices are benefiting from the decline in mortgage rates to historically low levels. However, the price changes in the analyzed cities lag behind the national average. Demand for real estate in city centers has weakened as people moved to the suburbs for reasons of affordability and the consequences of COVID-19. The continued migration to cheaper, more business-friendly states that also offer better tax and regulatory conditions has accelerated this trend.

middle East

Tel Aviv has seen some of the fastest price increases of the cities analyzed in this report over the past 30 years. Housing prices are currently on an upward trend again thanks to better financing conditions and the scarce supply of residential properties. The government has lowered the income tax for second homes, thereby favoring investments in the housing market. The real estate market in Dubai, on the other hand, has hit a new cyclical low. Since the last high in 2014, prices have fallen more than 35 percent, and the valuation is close to a depressed level. The positive price effects of the strong population growth and cheaper mortgage regulations are offset by the sustained strong growth in supply and the weak oil price.


House prices in Hong Kong and Singapore remained fairly stable in the first half of the year. However, while real home prices in Hong Kong are 50 percent higher than ten years ago, prices in Singapore have remained almost unchanged over the same period. The tightening of regulations in the “Lion City” over the past decade has proven to be very effective in limiting price growth. The uncertain economic outlook is weighing on the market outlook in both cities. However, since these each play a key role in their respective regions, demand is likely to remain high in the medium term. Thanks to its strong population growth and attractive financing conditions, Tokyo has developed into one of the most dynamic housing markets in the region. In Sydney, a loosening of lending standards and the RBA's rate cuts in recent quarters have resulted in a modest, but likely volatile, price rebound.

UBS Switzerland AG