The city of Toronto has the highest risk of a housing bubble, according to a recent survey released by investment bank UBS. Other cities at a high risk include Frankfurt, Hong Kong, Munich, Zurich and Vancouver.
According to the World Economic Forum (WEF), housing prices in Toronto grew by 17 percent over course of the last year. Lowest-ranked Warsaw was in fair-valued territory, according to the report, together with Sao Paulo, Milan and Dubai, where the housing market last crashed in 2018 together with oil prices. The U.S. cities in the ranking stayed below the bubble risk threshold (1.5), but all their markets were classified as overvalued.
Miami and Los Angeles were those coming closest to bubble territory at ratings of 1.39 and 1.31, respectively. White collar workers exploring the flexibility of work from home during the coronavirus pandemic caused a (probably temporary) easing of the situation in San Francisco (rank 17) and New York City (rank 20).
After unrest and political upheaval in Hong Kong had seen prices deteriorate, bubble risk increased once more in the notoriously pricey city in 2021, before falling again slightly in 2022.
Looking at the ratios of housing prices to rent, housing prices to income, the increase in mortgage payments to the increase of GDP, the increase in construction spending to the increase of GDP and, finally, the ratio of housing prices in the city and the surrounding areas, UBS determined their risk index.
According to the WEF, out of 25 cities included in the survey, all of which are known for their high real estate prices, nine were found to be in risk of a bubble. Twelve more were considered to have an “overvalued housing market”, among them Stockholm, Paris and Sydney as well as Geneva, London and Madrid.
Meanwhile the world’s most expensive cities in 2022 are New York and Singapore, according to the Worldwide Cost of Living Index released by the Economist Intelligence Unit. This is the first time New York has topped the rankings. Last year’s number one, Tel Aviv, now ranks third.
Overall, the average cost of living in the world’s largest cities rose by 8.1% this year, the survey reports. The war in Ukraine and the impact of Covid-19 on supply chains were also identified as factors behind the increase.
High inflation in the US was one of the reasons why New York topped the list. It was also high in Istanbul, with prices up 86%, Buenos Aires (64%) and Tehran (57%). Moscow and St. Petersburg rose in the rankings from 88th and 70th to 37th and 73rd respectively, partly as a result of Western sanctions following Russia’s invasion of Ukraine.
Los Angeles and San Francisco ranked among the top 10 most expensive: earlier this year, US inflation was the highest in more than 40 years in that country. Other US cities, including Atlanta and Boston, account for six of the top ten global movers up the rankings, the report stated. Mexico City has also jumped upwards by 33 places, with the peso supported by Mexico’s own interest-rate hikes, which are tracking ahead of the Fed’s. The strengthening dollar was also a factor in the prominence of US cities.
