The world’s housing markets have displayed remarkable resilience in the face of a global surge in inflation and interest rates, according to the UBS ‘Global Real Estate Bubble Index 2023’.
Over the past two years, these markets have substantially reduced imbalances, reshaping their dynamics.
Sydney’s housing market has experienced significant volatility, with a recent sharp price correction due to aggressive rate hikes by the RBA. While further downside is limited, improving foreign demand has provided support.
Only Zurich and Tokyo remain in the bubble risk category, a significant drop from nine cities in the previous year, according to the report. Cities like Toronto, Frankfurt, Munich, Hong Kong, Vancouver, Amsterdam, and Tel Aviv have shifted to the overvalued category. At the same time, Miami, Geneva, Los Angeles, London, Stockholm, Paris, and Sydney continue to be overvalued, much as they were in the previous year.
New York, Boston, San Francisco, and Madrid have transitioned to a fairly valued status, joined by Milan, São Paulo, and Warsaw. Singapore and Dubai have also seen increased demand, making them fairly valued.
The report also highlights the impact of rising mortgage rates, causing a halt in annual nominal price growth across the analysed cities, following a 10 per cent increase the previous year.
Despite these changes, affordability remains a concern. On average, affordable living space for skilled service workers is still 40 per cent lower than pre-pandemic levels. The report suggests further price corrections may occur if interest rates remain elevated.