Among the world’s major cities, Miami has the highest risk of experiencing a real estate bubble — after the city was repriced with the wave of New Yorkers and Californians moving to the region.

On the other hand, São Paulo has the lowest risk of a bubble among the 25 cities analyzed.

These conclusions are part of the UBS Global Real Estate Bubble Index, a study that the Swiss bank publishes annually analyzing the real estate market in major global metropolises.

In this year’s edition, there was a slight decrease in the risk of real estate bubbles, for the second consecutive year. “However, from a regional perspective, the picture is more nuanced: imbalances have decreased more in Europe, remained stable in the Asia-Pacific region, and increased in the United States,” the report says.

UBS also mentioned that, adjusted for inflation, property prices are on average 15% lower than in mid-2022 when interest rates began to rise globally.

“Cities that experienced the most significant price corrections are those that showed a high risk of a real estate bubble in previous years,” said Claudio Saputelli, the head of real estate responsible for the study.

Real prices in Frankfurt, Munich, Stockholm, Hong Kong, and Paris, for example, have fallen by 20% or more from the post-pandemic peak. In Vancouver, Toronto, and Amsterdam, the declines were around 10%.

The biggest increases were in Dubai and Miami and in cities with housing shortages, such as Sydney and Madrid.

In the study, UBS divides bubble risks into four categories: high risk when the indicator is above 1.5 points; elevated risk from 1 to 1.5; moderate risk from 0.5 to 1; and low risk when the indicator is below 0.5.

In the highest risk category, only Miami (with 1.79), Tokyo (with 1.67), and Zurich (with 1.51) are included. Los Angeles, Toronto, and Genoa are in the elevated risk category, while cities like Amsterdam, Sydney, Vancouver, Dubai, and Madrid fall into the moderate risk category.

Cities like San Francisco, London, New York, and Paris are at low risk. São Paulo is at the bottom of the list, with an indicator of only 0.04 — the lowest by far in the ranking.

“After a prolonged period of weakness, house prices in São Paulo have increased slightly for the second consecutive year,” the report says. “However, real prices continue to be more than 20% below the peak at the end of 2014.”

According to UBS, renting continues to be more financially attractive than buying in São Paulo due to “very high” interest rates.

“As a result, rents have increased by more than 10% in real terms over the past four quarters.”

Regarding Miami, UBS said that prices have risen almost 50% in real terms since the end of 2019 — 7% in the last four quarters alone.

“The market is flooded with wealthy individuals competing for the few properties with ocean views. But it’s not just the warm climate, location, and tax advantages that make Miami attractive to many new residents in the United States. Even though Miami prices are 50% higher than they were at the end of 2019, the absolute price level is still significantly below prices in New York, Boston, San Francisco, and Los Angeles,” the bank said.

In London, the situation is quite different, according to the bank.

The real estate market in the English capital has lost a quarter of its value since the historic peak in 2016. Recently, with falling inflation and interest rate cuts, prices have stabilized. With more cuts expected ahead, “demand for property may reignite, especially as rents are also rising.”

“The sky seems cloudier, however, in the luxury market, where uncertainties about taxation of the wealthy threaten to reduce demand in the segment,” the bank said.


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