The world’s top cities are facing an increase in the risk of a real estate bubble.
The risk of real estate bubbles in the world’s top cities has increased significantly over the past five years, according to the ubs wealth management annual report.
The study found that Toronto was the most dangerous territory, closely related to Stockholm, Munich, vancouver, Sydney, London and Hong Kong. Prices in each city have risen by an average of nearly 50 percent since 2011, while prices in other major cities have risen by about 15 percent, according to the report.
Average house prices in Toronto are $860,000. That number has slowed in recent months, as new provincial housing policies have been enacted to curb soaring housing prices.
But are these markets overvalued so that there is a risk of bubbles?
Although the study used the word “bubble” to describe some of the market, but this does not mean that in a high risk exists in the field of city “implosion”, one of the authors of the report, Jonathan Woloshin said.
Although no higher risk in the United States city, San Francisco and Los Angeles is considered to be high, because the rent and house prices are more than the income, so there is an absolute affordability issues, “Woloshin tell Here&Now ‘s Jeremy hobson.
He said real estate in several other U.S. cities, including New York and Boston, was seen as fair value based on job growth, income levels and average housing size.
Compared with other global cities, Chicago is considered undervalued.
“If you look at Hong Kong’s residential average size compared to the United States,” Woloshin said, “not to say, Hong Kong, London or a city like Sydney may be relatively more expensive to their counterparts in the United States”
In fact, Christie’s international real estate report found that Hong Kong overtook London as the world’s first luxury market for the first time. Dan Conn, Christie’s chief executive, told hobson in May that Hong Kong had become an attractive and safe market for wealthy Chinese buyers.
The price surge has had a negative impact. They have squeezed low – and middle-income earners out of the market, increasing the gap between the rich and the poor, and even leading to a rush to build homes that critics say will make us sick.
“There are several things that are different this time,” he said, compared with the last real estate bubble 10 years ago. “first, the quality of mortgage underwriting is much better [and] first. 2. Interest rates are significantly lower than the previous cycle. ”
As related to the company’s chief executive, Jeff Braun told hobson last month, the hot real estate market in cities like New York and San Francisco supported by the strong job growth, particularly in the technology industry. The company’s current project in Manhattan’s Hudson Yards area is the largest private mixed-use real estate development in U.S. history.
“Both cities are pushing a lot of technology and technology companies,” he said. “If you look at job creation in this sector and diversification away from financial services, that’s the real reason for this economic development.”
Woloshin also agrees that low interest rates play an important role in rising house prices because they make mortgages cheaper. According to Freddie Mac, the typical rate for a 30-year loan is 3.91%, which is low by historical standards.
“In the United States, the median home price is about $260,000,” he said. “But when you start moving to these multi-million dollar cities, it makes a huge difference.”
While the report shows that some cities are at risk of a bubble, Woloshin believes ubs’s data reflect the positive state of the global economy.
“Obviously, there’s never been a perfectly clear, but it’s a good global coordinated recovery, and we’ve seen it for quite some time,” he said.