Mortgage rate increases are scaring away new buyers and house prices in many countries are hitting all-time highs. is stagnating, adding a further hurdle to those wanting to set foot on the property ladder. These factors are combining to add an aura of fragility to big city across the world.
shows that Toronto in has the highest risk of a housing bubble of any large city in the world.聽
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
According to the report, nominal house price growth in the cities analysed 鈥渁ccelerated to 10% from mid-2021 to mid-2022, representing the highest increase since 2007鈥�, with four US cities 鈥� , Los Angeles, San Francisco and 鈥� among the top five with the fastest-growing prices. comes in fourth place.聽
The analysis shows that mortgage rates have almost doubled on average across the cities, which, coupled with an increase in prices, has made city housing even less affordable for first-time buyers. The report points out that 鈥� can afford roughly one-third less housing space than before the pandemic鈥�.
Housing market price corrections have already begun
A mix of 鈥�, , turmoil in the financial markets and deteriorating economic conditions are putting the housing boom under pressure鈥�, says the report, with price corrections already starting in a majority of cities with high valuations, or expected to begin in the coming quarters.
Toronto tops the ranking, with property price growth in the city accelerating to its highest rate in five years. House prices in the city are now 17% higher than a year ago.
The second-placed city in the ranking is Frankfurt in Germany, which had experienced double-digit percentage house price rises, although these high figures have started to come down in recent months. However, the report explains that 鈥渢he recent cooling masks a stunning rise: Frankfurt鈥檚 nominal housing prices are currently still more than 60% above their levels five years ago. In this period, price growth has significantly outpaced income and rental growth in a major decoupling from fundamentals. Investment demand has played a crucial role in driving up prices.鈥� This leaves the city in bubble risk territory.
sits in 15th place in the ranking, having experienced a strong rebound in average market rents over the past year 鈥渁s some would-be buyers fail to find suitable properties and business tenants return after the pandemic鈥�, according to the report. The risk of a real estate bubble in the city has slightly decreased compared with a year ago, according to the UBS research, but still 鈥渓eaves the housing market in overvalued territory鈥�.
Globally, the ever-spreading is translating into a bleak outlook for workers looking to purchase their first property, made even worse by rents hiking and inflation increasing while wages do not follow suit. However, as the report states, the picture is quickly changing, making the near future and buyers.
