According to a study by the major Swiss bank UBS, there is a high risk of a real estate bubble forming in the Main metropolis of Frankfurt.
Frankfurt am Main – The market for residential real estate in the Main metropolis Frankfurt According to a study, it is more overheated than in any other metropolitan region in the world.
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The skyline of Frankfurt is famous, but is there a real estate bubble in the Main metropolis? The major bank UBS is therefore very concerned. © Boris Roessler / dpa
According to the Swiss bank UBS, the financial center on the Main has the highest risk of bubbles.
In the period under study from mid-2020 to mid-2021, Frankfurt is ahead of Toronto, Hong Kong and Munich, as the money house reported on Wednesday. UBS chief investment strategist Maximilian Kunkel advises investors to exercise caution at the moment.
Real – i.e. adjusted for inflation – housing prices in Frankfurt have risen by 10 percent annually since 2016. The real estate experts found that rents have risen by almost 3 percent every year.
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Cheap loans would have led to the financing of speculative rental projects.
As in most other real estate markets, the Corona crisis is also showing signs of change in Frankfurt.
In view of the increasingly unaffordable living space and the new possibilities for flexible work, the population growth in the city has come to a standstill for the time being.
“The urge to go to the suburbs can also be seen on the Main,” states UBS.
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An enormous amount has been built and renovated in Frankfurt am Main for some time. (Symbol picture) © 123RF / Katarzyna Białasiewicz
In Munich, price growth in the city had come to a standstill and there was even a slight rental price correction. The growth is increasingly taking place in the suburbs.
This also applies globally, according to the study. “City life has become less attractive after the lockdowns. Economic activity has shifted in part from the city centers to outskirts and satellite towns – and with it the demand for residential property.”
For the first time since the beginning of the 1990s, from mid-2020 to mid-2021, prices outside the cities rose faster than inside. This development in favor of less urban areas will continue.
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In its “Global Real Estate Bubble Index 2021”, the bank calculated lower values of 2.16 and 1.84 for Frankfurt and Munich compared to the previous year – with more than 1.5 points there is a bubble risk.
This puts the two German cities ahead of London or New York. Vancouver, Toronto, Paris, Amsterdam, Stockholm, Zurich and Hong Kong are also considered to be significantly overheated with values above 1.5 points. Real estate in Madrid, Milan and Warsaw, on the other hand, was classified as “fair valued”.
UBS defines a real estate bubble as a strong and persistent deviation of the price level from fundamental data – such as income, economic growth and population migration.
However, if you consider how much of their income qualified employees have to spend on a 60 square meter apartment close to the center, Frankfurt and Munich are far behind Tokyo, Hong Kong, London and Paris.
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