The capital’s real estate market has moved out of bubble-risk territory for the first time in four years amid cooling London house prices, according to a new UBS report.
An end to London’s housing boom has pushed the capital down a UBS index that ranks the cities with the biggest real estate bubbles in the world.
While London “remains overvalued”, the Swiss bank said that the years when prices soared by 50 per cent (2012-16) “are long gone”.
Affordability issues and ongoing Brexit uncertainty has driven housing market weakness, the report said, with house prices in the capital roughly 10 per cent below their mid-2016 peak.
Munich was ranked as the most overvalued housing market globally, with low interest rates fuelling a wider Eurozone bubble risk.
Frankfurt and Paris have become the two most prominent new additions to the bubble risk zone when compared with last year.
|UBS Global Real Estate Bubble Index|
|3. Hong Kong|
|10. San Francisco|
“On a global level, economic uncertainty is outweighing the effect of falling interest rates on urban housing demand. However, in parts of the Eurozone, low rates have still helped to push real estate valuations into bubble risk territory,” said Mark Haefele, chief investment officer at UBS wealth management.
Hong Kong remains firmly in bubble risk territory, but momentum in its “red-hot property market has stalled” amid a weaker economic outlook after months of protests.
Claudio Saputelli, head of real estate at UBS Global Wealth Management, said: “The worldwide collapse in interest rates will not come to the housing markets’ rescue.”
He added: “Mortgage interest rates in many cities aren’t the major challenge for house buyers anymore. Many households simply lack the funds required to meet the banks’ financing criteria, which we believe poses one of the biggest risks to property values in urban centres.”