Square meter prices of 8,000 or 9,000 euros are now the norm in many corners of Munich. But what is behind these prices? According to a new study by the Swiss bank UBS, sometimes not much. According to a new ranking of economists, the housing market in the Bavarian capital is considered to be the world's most overrated.
In the UBS Global Real Estate Bubble Index, economists are investigating real estate markets in 24 major cities. Last year, they also attributed cities such as Hong Kong, London, Paris and Singapore the highest risk of dangerous speculation bubbles. But in 2019, the picture has changed: Now Munich is right at the top of the list. The experts also attest to a high risk of blisters in six other of the 24 cities - including Amsterdam and Frankfurt.
But why is Munich right at the top? The study cites the strong local economy, including the growing population, as reasons for the increase in demand for housing, which has only increased inadequately. As a result, real prices in Munich have more than doubled over the past ten years, with rents rising by more than forty percent.
Real Estate Bubble Risk Index of UBS
Housing markets in selected cities 2019
| rank | tendency | city | index |
|---|---|---|---|
| 1 | Munich | 2.01 | |
| 2 | Toronto | 1.86 | |
| 3 | Hong Kong | 1.84 | |
| 4 | Amsterdam | 1.84 | |
| 5 | Frankfurt | 1.71 | |
| 6 | Vancouver | 1.61 | |
| 7 | Paris | 1.54 | |
| 8th | Zurich | 1.40 | |
| 9 | London | 1.31 | |
| 10 | San Francisco | 1.15 | |
| 11 | Tokyo | 1.11 | |
| 12 | Stockholm | 1.10 | |
| 13 | los Angeles | 0.99 | |
| 14 | Geneva | 0.90 | |
| 15 | Sydney | 0.88 | |
| 16 | Tel Aviv | 0.78 | |
| 17 | Madrid | 0.61 | |
| 18 | Moscow | 0.50 | |
| 19 | new York | 0.50 | |
| 20 | Singapore | 0.45 | |
| 21 | Boston | 0.36 | |
| 22 | kite | 0.20 | |
| 23 | Dubai | -0.26 | |
| 24 | Chicago | -0.77 |
Bladder risk> 1.5
Overvalued 0.5 to 1.5
Fair rated -0.5 to 0.5
Underrated -1.5 to -0.5
Source: UBS index
The positive development of wages with a plus of 15 percent can not compensate for this development: "For the purchase of a 60 square meter apartment near the city center of Munich, a qualified worker in the service sector must continue to raise about eight annual income," it said in the Study.
Surroundings could catch up at the expense of the cities
Frankfurt has moved into the index in the risk zone of the cities, which are said to have a high risk of bladder. In just one year, according to the study, real prices rose by eleven percent. We are talking about the "highest rate among all recorded cities". As demand in Frankfurt is higher than supply, house prices and rents continue to rise. Maximilian Kunkel, responsible for investment types in Germany at UBS Global Wealth Management, said: "Investors should therefore exercise caution when considering purchases in these regions of Germany."
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While the risk increases in German cities, according to the study, it has "markedly declined" in Vancouver, San Francisco, Stockholm and Sydney, in New York and Los Angeles after all, still slightly. "Increasing economic uncertainty more than offsets the positive impact of falling interest rates on real estate demand," says Mark Haefele of UBS Global Wealth Management.
In the eurozone, on the other hand, the low interest rates have fueled the real estate boom, as they also see a supposedly secure investment in apartments and houses. For many home builders in spe are therefore not the interest of the problem, but lack of equity to even get financing from the bank.
According to the authors of the UBS study, this development also threatens the current strategy of wealth augmentation. Cities could become less attractive, jobs and housing could be more localized. "Although urbanization, digital revolution, and building restrictions are still supporting real estate valuations in cities, real increases in prices can no longer be expected."
