A report from an investment bank ranked Sydney real estate as the third most overpriced in the world.
UBS recently announced that it has come up with a Global Real Estate Bubble Index to determine which real estate markets in the world is in danger of reaching a bubble and eventually burst into a crisis. According to Your Investment Property Mag, Sydney is ranked as the third city with the most inflated property prices in the world trailing behind London and Hong Kong, respectively.
Based on the parameters set by the Bubble Index, Sydney was given a score of 1.39 which is lower than the 1.5 needed to be marked as a market headed for a bubble. UBS thinks that there is a big possibility that Sydney's property market will be able to correct itself in time. Indicated in the report is the noted 30 percent increase of real housing prices from 2012 while the same cannot be said of the rent and wages of workers which remained virtually the same in that period of time.
The report points out that this surge in prices is just a reaction to a strong Asian demand which has seen a huge rise when the Chinese stock market faltered recently paving the way for Chinese investors to look for other property markets. To compound the problems, the economy is also slowing down and stricter regulations might cause an increase in the possibility that the market will correct itself in the medium term.
Meanwhile, according to Financial Review, investors have become more conscious of the housing slowdown that Sydney and Melbourne are currently experiencing in their respective housing markets. Buyers and sellers are now transacting at much lower rates which is a sign that they are changing their stand on the real value of properties.
