According to research by UBS Wealth Management, Milan is the European city that offers the most interesting and convenient valuations. In fact, the study states that a qualified professional in the service sector must work an average of 5-7 years to be able to afford a 60mXNUMX apartment.
In the rest of Europe, however, the situation is already heating up. The UBS Global Real Estate Bubble Index has risen in all European cities studied over the past four quarters. Strong increases were recorded in Amsterdam, Frankfurt and Munich
The UBS Global Real Estate Index identifies the risk of a real estate bubble based on precise indicators in some of the world's most important financial centres. The index uses the following risk-based classifications: depressed market, undervalued, fairly valued, overvalued and at risk of a bubble.
Overall, the residential real estate market that belongs to the main cities located in developed economies is still overvalued and the number of centers at risk of a bubble has increased compared to 2016.
Toronto, a new entry, leads the 2017 ranking. As in 2016, Stockholm, Munich, Vancouver, Sydney, London and Hong Kong are confirmed to be at bubble risk; Amsterdam was added to the list, which was just overrated last year. According to the study, the only underrated metropolis is Chicago, while three-quarters of the world's cities are either overvalued or at risk of a bubble.
Real house prices remain about 30% below their 2007 level. Slow economic growth continued to weigh on the recovery in residential property. However, the latest data point to an improving outlook and a steady increase in employment in Lombardy, which in turn will support incomes. UBS believes that house prices are therefore bound to rise.
Claudio Saputelli, Head of Global Real Estate at the Chief Investment Office of UBS Wealth Management, explained: “The improvement in the general economic situation, partly accompanied by solid income growth in major cities, has come together with excessively low financing costs , giving rise to a sustained demand for housing in the metropolis». And, given that in the most interesting cities the offer is always subject to limitations, prices have soared. The combination of low funding costs and bullish expectations has pushed valuations soaring, exacerbating the danger of local bubbles.
