The research service of the UBS bank has recently published the latest edition of the Global Real Estate Bubble Risk Index, an annual report in which the evolution of the offer is evaluated, demand and housing prices in 25 major capitals of various developed economies.

According to UBS experts, many of the cities studied face an enormous risk of bubble. Munich, with a score of 2,35, top of the list and accumulates three years of continuous growth. Conversely, Chicago stands out for obtaining a rating of -0,66, indicating that house prices are below normal, something that also happens in Dubai, whose rating is also in negative territory, with -0,4 points.

Madrid is one of the cities covered by the UBS index. Of the twenty-five capitals analyzed, the Villa and Court figure in the position 21, indicating that the risk of bubble in its real estate sector is markedly lower than that observed in most of the large cities studied. The mark obtained by Madrid is 0,43 points.

Taking into account that the grade obtained in 2018 it was of 0,36 points and the grade obtained in 2019 came to 0,61 points, relaxation of the risk of bubble seems like good news, but it is still true that the impact of covid-19 may have contributed to the favorable evolution reported by UBS. In the next years, stop strangling supply and favoring new urban and housing developments will be a key policy to prevent the risk of bubble go on the rise again.

In any case, the experts of the UBS research service consider that the current price of houses in Madrid tends towards equilibrium, so that La Villa y Corte appears between the capitals with a “fair valuation” in your housing stock. Apart from Chicago and Dubai, where prices are below normal, Milan and Warsaw are the only capitals that have a lower grade than Madrid, with 0,23 and 0,36 points each.

Among the cities with high prices, UBS considers the situation to be somewhat more manageable in San Francisco, Tel Aviv, Sydney, Moscow or New York, with notes ranging from 0,56 a 0,99 points, while Vancouver, London, Such, The Angels, Stockholm or Geneva present a more stressed housing market, with ratings ranging from 1,08 and 1,37 points.

However, UBS believes that the most delicate situation of all is that of Munich, Frankfurt, Toronto, Hong Kong, Paris, Amsterdam and Zurich. In all these cities, who receive grades ranging from 1,51 a 2,35 points, the index observes a very high level of real estate prices, consistent with a scenario of true risk of bubble.

real estate-bubble-risk-1.png
If the result of the twenty-five capitals analyzed is compared, the average grade is 1,0012, while Madrid receives 0,43 points.
real estate-bubble-risk-2.png
real estate-bubble-risk-3.png

[Source: Free market]