Frankfurt am Main – The cities Frankfurt And Monk According to one study, they have the highest risk of a housing bubble in the world.
Dark clouds over the Frankfurt skyline: Is a real estate bubble forming in the Main metropolis? The big bank UBS warns of this danger. © Boris Roessler/dpa
According to the evaluation of the large Swiss bank UBS, the financial center on the Main is in second place after Toronto.
The real estate market in Munich is also seriously overheated. The city ranks fourth among all 25 surveyed metropolises, right after Zurich.
“Investors especially who are considering buying in these regions of Germany for yield reasons should pay attention at the moment,” advised Maximilian Kunkel, chief investment strategist at UBS in Germany.
In its “Global Real Estate Bubble Index” released on Wednesday, the bank calculated a value of 2.21 for Frankfurt and 1.80 for Munich – with more than 1.5 points there is a risk of a bubble.
As a result, Toronto, Amsterdam, Tokyo, Vancouver and Hong Kong are also considered highly overvalued by more than 1.5 points. UBS sees London, Paris, Los Angeles and Sydney as slightly cooler.
Due to low interest rates, home prices have steadily decoupled from local incomes and rents over the past decade, according to UBS. “Cities most at risk of a bubble have seen inflation-adjusted price increases of an average of 60% over this period, while real incomes and rents have risen only about 12%.
The Marienplatz in Munich – UBS bank also sees the danger of a real estate bubble forming for the state capital of Bavaria. © 123RF/serrnovik
In previous years, UBS had already done this a strong overheating for the real estate markets of Munich and Frankfurt. However, when you consider how much of their income skilled employees have to spend on a 60 square meter apartment near the city centre, Frankfurt and Munich lag far behind Tokyo, Hong Kong, London and Paris.
In Frankfurt, UBS is now observing a cooling of the market. In the main metropolis, the usual double-digit price hikes have eased for the first time in a decade, he said. “Between mid-2021 and mid-2022, property prices only increased by about 5 percentage points.” Apartment prices in Frankfurt are still more than 60% higher than they were five years ago.
Monaco has the highest price/rent ratio. It is therefore particularly expensive to buy a property here compared to renting. After prices more than doubled in the last decade, growth here too has weakened to around five percent. “The boom is coming to an end,” Kunkel said, looking at both cities.
In general, UBS sees real estate markets before an inflection point. While interest rates have risen sharply and the economic outlook has bleaked, high inflation is reducing the purchasing power of households. This means that the still robust labor market in many cities is the last pillar of the internal market.
Unlike many experts, who expect only a slowdown in the real estate boom, UBS warns of serious consequences: “Significant price corrections are expected” in many of the very highly rated cities in the coming quarters.
