The Global Housing Bubble Is Biggest In These Six Cities

Tyler Durden's picture

One year ago, when UBS last looked at the world's most expensive housing markets, it found that London and Hong Kong were the only two areas exposed to bubble risk.

What a difference a year makes, because in the latest report by UBS wealth Management, which compiles the bank's Global Real Estate Bubble Index, it found a new champion for the title of "world's biggest housing bubble", namely a familiar name, Vancouver, but also that as many as six cities had made the "bubble" category, up from last year's two. Of last year's two "winners", London has been knocked into second place this year, and Hong Kong sixth, but both are still in bubble-risk territory.

Looking at soaring home prices across the globe, UBS has concluded that low interest rates have now created a new global housing bubble in major cities around the world, with Vancouver and London most at risk. Not surprisingly, the Swiss bank notes that ultralow interest rates at global central banks have contributed to overheating in the housing market in recent years.

Vancouver and London came first and second on the 2016 list of cities most at risk of real estate bubbles. Bubble risk was also evident in Stockholm, Sydney, Munich and Hong Kong: house prices in these six cities have increased by nearly 50% on average since 2011. The average price rise in other financial centers has been less than 15%.

Who is to blame for this latest global bubble? Why your friendly, local central banker of course.

As the WSJ summarizes, loose monetary policy at global central banks is a key driver behind rising prices, the report claims. Low interest rates have pushed investors to hunt for returns in tangible assets, “so it is hardly any wonder that housing markets are again overheating,” according to report authors Claudio Saputelli and Matthias Holzhey.

For the European Central Bank, which controls monetary policy for all 19 member countries, the inability to adjust interest rates for particular economic development in separate countries has contributed to rising house prices in the region, UBS said.

While unemployment across much of Europe remains in the double digits, the locals are now faced with a double whammy of not only having no income, but even if they do, being unable to afford a home. 

“All European cities are overvalued, apart from Milan,” the report said. Central banks in the U.K., Canada and Australia are also keeping interest rates low. Combined with stable supply of homes and strong demand from foreign buyers, especially in China, “this has produced an ideal setting for excesses in house prices,” the authors said, adding that price-growth deceleration in New York City a "sign of weakness of the financial sector."

Meanwhile, Vancouver house prices have been significantly overvalued since 2007, according to UBS. The culprit there is not so much the BOC as the PBOC: until recently Vancouver served as the primary offshore target for Chinese money launderers, which neither the financial crisis nor weakening commodity prices managed to dent. However, this bubble now appears to have finally burst after the provincial government of British Columbia introduced a 15% transfer tax on foreign home buyers in August, leading to a crash in the most expensive local housing segments.

As for other housing markets, UBS said that in London, an acute housing shortage and readily-available mortgages “should be able to sustain the inflated prices for the time being,” the report said.

According to UBS it is impossible to predict what might pop the bubbles, and when, even in cities with the clearest signs of a problem, UBS said. “A sharp increase in supply, higher interest rates or shifts in the international flow of capital could trigger a major price correction at any time,” Holzhey said. Additionally, a change in “macroeconomic momentum”, investor sentiment, or major supply increase may trigger a “rapid price decline.”

Finally, there was some good news for Chicago residents: UBS found that the Chicago housing market remains undervalued “relative to its own history." However, considering the daily shooting spree that takes place in that city, it is probably not a big surprise.

UBS concludes that investors now buying cities considered overvalued “should not expect real price appreciation in the medium to long run,” UBS said.

That said, with every other asset class similarly overvalued, it is difficult to make a case in what other asset classes the nearly $2.5 trillion in record new liquidity created by central banks every year will see safer returns.

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38BWD22's picture

 

 

Of interest, perhaps, to some is the case of Lima, Peru.  Condo prices have been going up strongly for over 10 years.  I should have bought when they were cheap...

 

roxyNL's picture

few weeks ago molyneux and alex jones did a video about the supposedely no-go zones in the "muslim London" ak Tower Hamlet borough, where according to them there are sharia squads !

These two morons don't realise that a 2 bedroom apartment in that neighborhood costs minimum more than 1 million USD and that'it lies just between the City and Canary wharf. The worse were the comments ... people are sometimes so absurd and ignorant, a simple search on zoopla.co.uk will show you that the majority of them can't even afford a studio or a parking place (100k usd) in that supposedely dangerous borough!

I'm Broke AF's picture

Does it matter what Alex Jones says?  The guy's a moron with a mouth.  He talks about globalist shills but supports idiots like Donald Trump for president.  Alex Jones is more concerned about selling you his male-vitality herbal juice than checking his facts.  There is no such thing as a "no-go' zone in London, I've been throughout London many times and have never had an issue - don't get me wrong, there are crazies, some of them wear suits and ties too. 

roxyNL's picture

He is ((( globalists ))) controlled opposition. Unfortunately he has many followers on ZH !

alex jones exposed as zio supporter

https://www.youtube.com/watch?v=RymaodaYc0E

molyneux exposed as zio supporter

https://www.youtube.com/watch?v=ndRj2NtsmvM

joseph watson exposed as zio supporter

https://www.youtube.com/watch?v=ktX4viox8zY

zvzzt's picture

right.... 

trust me baby.... there are VERY definenitely no-go areas in London.... Lived there quite some time in the good old (rich) days in the early and mid 1990's. Plenty of places where the police didn't dare to go and where no cab would take you after 2200 hrs. 

Had to go back in 2011 and was shocked by the way the town went down the drain (compared to 1990's, that is). 

Parrotile's picture

Hackney and Homerton come to mind. Even in the 1990's you didn't walk the streets at night, if white! At that time there were major drug wars going on between Jamaican  Drug Lords (though strangely unreported by the MSM, which was starting to mention these Boroughs as "Up and Coming", along the likes of Islington).

Hillarys Server's picture

I really like Stefan Molyneux and Alex Jones.

Also YouTube sites like Greg Hunter, x22Spotlight and Paul Joseph Watson. 

And everything by Paul Craig Roberts, former Asst Treasury Secretary.

Great interviews, discussion, thoughts and background info.

People who don't like Trump probably wouldn't like them though.

swmnguy's picture

I like Dr. Roberts a lot.  Don't care much for the others.

I'm Broke AF's picture

We don't need the geniuses at UBS who perpetuate and inflate the same bubble to tell us there is a bubble.  In Canada, the average Canadian needs to earn 10X times the average income just to purchase a detached home.  Canada has had a housing bubble where home prices have been increasing steadily for 17 years while wages are stagnant.  I don't need UBS to tell me that we have a bubble, I just have to ask my local real estate agent what the average home price is to know that this artificial wealth insanity is gonna pop.

847328_3527's picture

Much of the money laundering has been funnelled into some of those cities, Vancouver is a good example. There is no economic reason why prices are so high, only a criminal money laundering one.

 

As long as corrupt governments turn a blind eyes to this Loot flooding into some locations, the circus will continue and price local hard working people out of that market.

Parrotile's picture

What about Melbourne?! We're JUST as expensive as Sydney (but having said that we are a much more "liveable" city!)

 

A nice house, but FOURTEEN MILLION????  http://www.domain.com.au/20-linlithgow-road-toorak-vic-3142-2011513292

 

As for "Liveability Rankings" -  https://ourworld.unu.edu/en/the-worlds-most-liveable-cities

Creative_Destruct's picture

....And the world-wide serial-bubbles continue, brought to you by your WONDERFUL central bankers.

venturen's picture

Creative Destruction is dead....we just have Wonton Destruction!

Creative_Destruct's picture

Yes. The naturally controlled limited process of creative destruction has been circumvented by the mad keynesian money-pumpers who prop up the shit entities that should naturally go bye-bye. I'm afraid the only possible corrective force that remains is the massive wonton destruction you mention which will inevitably occur when ALL of the dead-wood zombie-shit entities, aka malinvestments, are eliminated in a gargantuan calamity.

BUT, the CBs will react by re-propping those POSs back up. And the "end-game" clamity will eventually be even worse because of this.

drunkenlout's picture

You probably meant WANTON destruction in the land of the Bard.  "Wonton" destruction happens in Hong Kong.

Creative_Destruct's picture

True :) ;  our bad!

I personally do like orally destructing Wontons, however.

Lost in translation's picture

In the immortal words of Devo, "how LONG can this go ON!?"

bamawatson's picture

pablo cruise -- how long has this been goin on

Creative_Destruct's picture

Through MANY cycles of monetary re-propping, until the shit-pile collapse becomes too big to re-stack.

Where that end-point is, is unpredictable. But it is always much further out than a responsible rational person expects.

ZeroPoint's picture

Boston & New York markets are fair value? Ha, ha, ha.

effendi's picture

I'm a resident in one of those bubble cities (Sydney). The cheapest houses start at around half a million USD in crappy suburbs. Anything decent in a middle class suburb is over the million mark. Locals are leaving for regional areas as they cannot afford to buy and a large influx of Chinese and other Asians have made many areas majority non white (my own suburb is majority Indian). My daughter (university educated and a HR manager in a legal firm) cannot afford to buy, so what about those on less than middle class incomes? The suburb next to mine (working class) has average land values of about $600,000 (10 years wages) but those same blocks were originally sold for $80 back in 1945 (about 10 weeks wages back then).

chosen's picture

If you walk throught the campus of the University of California Berkeley you will see that it is actually the University of China Berkeley.  The fucking Chinese are taking over our planet.  Fight back.

CNONC's picture

The japs were taking over in 1985.  Same shit, same scam, same mistakes, different decade.   

walküre's picture

Way more Chinks than Japs though and the Chinks are creating loans for their shit companies from zip, nada, zilch and then channeling the money overseas to buy up assets. At least the Japs had a solid economy and real corporate value.

Everything the Chinese touch turns to shit.

zvzzt's picture

lol! well, good thing about the Chinese is that they like to party and have no real religion getting in the way. Lots and lots closer to 'Christian' (or whatever that means) values that the freaking sand-sucking-types. Whatever else happens, I prefer the Chinese taking over the planet rather than Mr Towel Head... Us crackers have 'lost' anyway.

tarabel's picture

 

 

I say let em come. The more the better. 

We're just exporting communism to them, in the form of their newly-brainwashed children.

Quite ironic actually.

joeknows's picture

Boston is fair valued?  Hahaha...who valued these areas?  The same guy that missed the first crisis and bubble?

Barry McBear's picture

No Toronto?  Flawed.

Canadian Renegade's picture

While there are super bubbles in places like Vancouver that can definitely pop I don't think those of us suffering the generally elevated housing prices across Canada are going to get any relief any time soon.

These "housing bubbles" are market distortion caused by ZIRP. The problem is that there is nowhere else safe for what's left of middle class money to go. Savings accounts and bonds are yielding real negative rates with inflation factored in. The stock market could crater at any moment because it is so liquid. So where else can you put what little saving you might (gold silver obviously).

Real estate in Canada has also out performed the stock market by 2-3x since 2000 so there is a perception of safety and that prices will continue to rise. Throw in a few hundred thousand immigrants a year and there is a lot of upward pressure on real estate even though affordability isn't there.

The only thing that will prick the bubble would be rising rates which is very low probability. The BOC is more likely to cut again especially after the recent inflation numbers then to hike. 

Paul John Smith's picture

When I was in Seattle, a couple weeks ago, TOTAL BUBBLE ZONE ...

Don't know why Seattle is not listed, this data seems strange.

K_BX's picture

Neew York fair valued? LOL - If you are ready to commute 4 hours daily to Manhattan maybe... 

SmittyinLA's picture

Vancouver is an ant compared elephant Los Angeles.

600,000 vs 4,000,000

LA credit is worse too, Vancouver has a lot of all cash buyers, in LA even the mayor has a mortgage or 2

Putrid's picture
Putrid (not verified) Sep 27, 2016 12:45 PM

Article makes no sense.

PTR's picture

Rondon Bridge is falling down...

tarabel's picture

 

 

Bad news for Alizonans.

Graph's picture

Barstow, CA ?

Will be a booming city in near future.

brooklinite8's picture

Where is Brooklyn on this list? For a place with no good schools. No open air to breath, no safe nights to walk, garbage bag smell over powering the smell of the flowers, food quality with the worst even compared to africa house prices have doubled in the past 3-4 yrs. As long as central bankers keep messing around with the free markets the bubbles will keep coming. Bubbles in real estate and commodities hit the people's stomach hard. I wouldn't mind a bubble in Stocks. I actually would like the bubbles in stocks as often as possible. Just time your puts. 

walküre's picture

I don't know the real estate laws in every jurisdiction on the planet but I know that foreigners cannot buy in Denmark. They need to have established 5 yrs residency in either Denmark or any EU jurisdiction (and pay taxes there) before they can buy. Denmark has some of the best and most affordable real estate in Northern Europe where life is still beautiful and without racial problems (for the most part). The Danish also fight against invading muslim hordes but it is largely underreported because the Danish press knows what's good for them.

The Chinks have bought up more than any other group of people before. They are operating and cooperating with their government. The Chinese government is complicit and I figure, this is part of their takeover plan. Why invite a traditioal German manufacturer to open up shop in China when they can buy the German company with Mao paper and simply transfer the IP?

Everyone knows how difficult it is for foreigners to either buy property in China or open up a company there.

We need Trump who can try to rectify this At least he's willing to take a shot at it. Hillary is part of the machine that sold out the world to the Chinese and she would rather scratch her own crazy eyes out before she put up trade barriers and financial barriers against China.

Trump 2016!

 

 

Skiprrrdog's picture

Finally, there was some good news for Chicago residents: UBS found that the Chicago housing market remains undervalued “relative to its own history." However, considering the daily shooting spree that takes place in that city, it is probably not a big surprise.

I might be down for that, but only if the house had a moat with nigger eating alligators, safe rooms, several armed guard towers, and assorted spread out monkey traps...

O-Nomics's picture

My Double Double chart of Vancouver housing shows the number of times single family house prices have doubled since Oct 2002

http://www.chpc.biz/vancouver-housing.html#Double

The latest double just occurred (June 2016) and the momentum to produce a 3rd double looks to be evaporating at the top of a classic Eiffel Tower peak. For sure the seasonal rally is over and 1Q 2017 will be closely watched to see if sentiment has changed from get me in to get me out.