- The housing market is typically one of the most stable and important elements of any modern economy.
- The UBS Global Real Estate Bubble Index tracks changes in the valuation of housing markets across the world to determine which cities are at the greatest risk of a bubble.
- The bank looks at five factors including price-to-income and price-to-rent levels, change in mortgage-to-GDP and change in construction-to-GDP ratios, and the relative price-city-to-country indicator.
- Here are the seven cities facing the greatest risk of a housing bubble, according to UBS.
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Swiss bank UBS published its 2019 Global Real Estate Bubble Index on Monday, revealing which cities around the world are fairly valued, as well as those that are facing the greatest risk of a real estate bubble.
"The UBS Global Real Estate Bubble Index puts the housing market into long-term perspective and is designed to track the risk of property price bubbles in global cities," the firm said in the report.
According to the bank's scale, any city that falls above 1.5 on the index is considered at risk for a bubble. In order to determine the index score for each city, UBS evaluates five sub-indices including price-to-income and price-to-rent levels, change in mortgage-to-GDP and change in construction-to-GDP ratios, and the relative price-city-to-country indicator.
All of the cities UBS tracked within the eurozone saw their index scores increase due to low interest rates, the bank said. Average price growth has also stalled for the first time since 2012, while the average index score declined slightly in 2019, the report found.
Here are seven cities around the world with the highest risk of a real estate bubble, ranked in increasing order of vulnerability, according to UBS: