The 3 cities in the world most at risk of a housing-market crash

  • A report by UBS analyzed price growth in 25 major urban housing markets around the world from the second quarter of 2019 through the second quarter of 2020.
  • Of those markets, seven are in bubble risk territory, meaning they are at risk of a housing-market crash.
  • The top three are Munich, Frankfurt, and Toronto.
  • Visit Business Insider’s homepage for more stories.

On a global scale, the housing market has shown strength during the coronavirus pandemic, despite the economic downturn. 

A recent report by UBS identified three factors for its resilience.

First, as home prices are a backward-looking indicator of the economy, UBS said they react with a delay to economic downturns. The number of transactions declined in most cities in the second quarter of 2020 compared with the previous year, “complicating price formation and reducing the validity of observed prices.”

Second, the majority of prospective homebuyers didn’t suffer direct income losses in the first half of 2020, according to UBS.

“Credit facilities for companies and short-time work schemes mitigated the fallout from the crisis, supporting employees’ housing affordability,” the report said.

And third, governments helped homeowners in many cities during the lockdown periods, with increased housing subsidies, lowered taxes, and suspension of foreclosure procedures.

The report analyzed annual rates of house-price growth in 25 major cities from 2001 through the second quarter of 2020. The markets in the study were Munich; Hong Kong; Zurich; Paris; Singapore; London; Geneva; Frankfurt, Germany; Stockholm; Vancouver, British Columbia; Milan; Toronto; Tel Aviv, Israel; Sydney; New York; Moscow; Amsterdam; Madrid; Tokyo; San Francisco; Los Angeles; Boston; Warsaw, Poland; Dubai, United Arab Emirates; and Chicago.

In 21 of those cities, price growth accelerated over the past four quarters, a trend that USB called unsustainable. 

In fact, according to the UBS Global Real Estate Bubble Index, seven of the cities in the analysis are in bubble-risk territory, or at risk of a housing-market crash. Business Insider rounded up the top three.

Price-growth rates recorded in the analysis are adjusted for inflation.

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