The World’s Biggest Real-Estate Bubbles, From Hong Kong To Toronto

By Reade Pickert
Bloomberg News

WWR Article Summary (tl;dr) Boston, Milan and Singapore were deemed fairly valued, while 10 cities including San Francisco, Tokyo and Stockholm were overvalued and six were in bubble-risk territory.

Bloomberg News

Chicago may be freezing cold for parts of the year, but it has one big advantage over global cities such as New York, London and Hong Kong: it’s affordable.

The Windy City is the only undervalued housing market in a survey of 20 financial centers by UBS Group AG, partly due to its widely publicized fiscal problems and rents rising faster than home prices.

New York moved from affordable to overpriced in this year’s rating even as inflation-adjusted real estate prices fell 2 percent in the past four quarters, according to the bank’s Global Real Estate Bubble Index.

Chicago is “a wonderful city, but its fiscal challenges are well-known,” Jonathan Woloshin, head of Americas real estate at UBS’ global wealth unit, said Thursday in a phone interview. “When you factor in population flows, when you factor in income growth, when you factor in home price growth, that’s why Chicago scores where it does.”

Boston, Milan and Singapore were deemed fairly valued, while 10 cities including San Francisco, Tokyo and Stockholm were overvalued and six were in bubble-risk territory, with Hong Kong’s market the most inflated.

Typical signs of a real estate bubble include prices rising out of sync with incomes, as well as economic imbalances like excessive lending and construction activity, the bank’s researchers said.

Unlike the boom of the mid-2000s, there’s no evidence of simultaneous excesses in lending and construction, and outstanding mortgage volumes are growing at about half of the rate of the pre-crisis period, according to the report.

‘Many Years’
Property markets can be “mispriced or overpriced for many, many years,” Woloshin said. “Excesses can go on much longer than people expect.”

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