Banks have been warning about the different risk of growing real estate markets all over the world due to mortgage crisis that happened eight years ago.
According to cnbc.com, UBS has announced that European cities are now experiencing over valuation and London is the most overvalued market in Europe and most at risk of housing bubble worldwide.
In a global property report of a bank in the region, it said that "The UBS Global Real Estate Bubble Index, as well as the cross-sectional benchmarks, point to the risk of a substantial price correction should the fundamentals for real estate investment deteriorate."
Properties in London is also declared as the "world's least affordable" due to high possibility of property bubble. Houses in the city are now six percent higher than its peak in 2007. UBS also said "Foreign demand (for London properties) and demand deriving from safe-haven seekers largely explain current valuations. Global geopolitical risk and the high property valuations in Asian cities have helped to propel London house prices to new heights," in which the bank added that "domestic buyers too have contributed to the appreciation" due to enticing results of population growth and buy- to- rent investments.
Second to London, Amsterdam is surprisingly the next city in the continent that most likely to have a housing bubble. UBS has also said that Sydney is the world's most overvalued city.
In a report by smh.com.au [Sydney Morning Herald], UBS's Global Real Estate Bubble Index has indicated that "gradually deteriorating economic conditions, a slowdown in China and tighter regulations increase the risk of a significant correction in the medium term."
UBS economist Matthias Holzhey said "House prices have decoupled most from local incomes in Hong Kong, London, Paris, Singapore, New York and Tokyo. Buying a 60-square-metre apartment exceeds the budget of most people who work even in the highly-skilled service sector."
UBS report has also said that "Hong Kong has flirted with a bubble since 2011, while Sydney's market is catching up quickly and trending close to it."
