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Tags: cities | housing market | bubbles | ubs

UBS: 6 Cities Are at Biggest Risk of Housing Market Bubbles

UBS: 6 Cities Are at Biggest Risk of Housing Market Bubbles

(Dollar Photo Club)

By    |   Monday, 10 October 2016 07:44 AM EDT



UBS Wealth Management warns that “major urban housing markets are again overheating, just a few years after the last major wave of global correction.”

Claudio Saputelli, head of global real estate in the chief investment office at UBS Wealth Management, was blunt in his recent assessment: “We see a significant overvaluation of housing in some key financial centers, with six markets in bubble risk territory.”

Although cities at risk of a bubble “may not experience a crash, investors should still bear in mind the significant chance of a correction over the medium term,” he wrote for CNBC.com.

“In the six cities that we see as most at risk of a bubble – Vancouver, London, Stockholm, Sydney, Munich, and Hong Kong – house prices have increased by almost 50 percent on average since 2011. In the other financial centers, prices have only risen by less than 15 percent. This gap is out of proportion to differences in local economic growth and inflation rates,” he wrote.

“The discrepancies have emerged out of a mix of optimistic expectations, capital inflows from abroad and loose monetary policy. The weak economic foundations of the latest price boom make the housing markets in those cities vulnerable.”

But not everyone is so dour about the housing situation. Despite record home prices in some big cities, the U.S. market is nowhere near as bad as it was a decade ago.

Home prices have hit record highs in some major U.S. metropolitan areas, and house-flippers are behaving like it’s 2005: It’s no wonder people are chattering about another housing bubble, Bloomberg reported.

But residential real estate isn’t in a speculative bubble, industry observers contend. Instead, a low inventory of available homes is driving prices higher—prices, however, will eventually recede as buyers throw up their hands, or as more new homes come on line. The structural issues that led to the housing collapse last decade aren't present.

“The havoc during the last cycle was the result of building too many homes and of speculation fueled by loose credit,” said Jonathan Smoke, chief economist at Realtor.com. “That’s the exact opposite of what we have today.”  

(Newsmax wire services contributed to this report).

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These 6 cities are at the greatest risk of housing market bubbles
cities, housing market, bubbles, ubs
Monday, 10 October 2016 07:44 AM
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