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'Bubble' index ranks cities by over-valued homes

London's housing market has started to stagnate, but homes in the UK's capital remain among the most over-valued in the world, according to a report out today.
The UBS Global Real Estate Bubble Index 2018 report, published by the Swiss bank's wealth management arm, ranks London as the sixth city most at risk of being in bubble territory on a list of 20 cities around the world that it has assessed.
Topping the list is Hong Kong which, UBS notes, has seen house prices rise by more than 10% during the last year.The bank notes that house prices in the territory have more than doubled since the global financial crisis while, in real terms, incomes have remained unchanged.UBS writes: "The market is chronically under-supplied. Demand remains buoyant thanks to the residential market's high appeal to local and foreign investors alike. So over the last decade, its affordability has fallen the most among the cities considered in this study."Even for highly skilled workers, property ownership is now out of reach. With citizens priced out of their own market, political pressure has mounted to curb growth."The bank points out that Hong Kong recently introduced an occupancy tax on vacant but completed homes to encourage developers to sell them as quickly as possible.It adds: "You need to work 22 years to afford a 60 square metre flat in the Asian metropolis. Ten years ago, it was just 12 years."Next most over-priced, according to the bank, is Munich, where prices have doubled during the last decade and where, thanks to a low vacancy rate, rents have increased by 9% in the last year alone.
'Bubble' index ranks cities by over-valued homes

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Munich is home to the annual Oktoberfest beer festival
UBS says that, with average homes now costing eight times the average income in the Bavarian capital, an all-time high, there is the risk of a housing crash, as construction of new homes has recently taken off.Two Canadian cities, Toronto and Vancouver, are the next most over-priced cities, according to the report, reflecting demand and supply imbalances.In Toronto, the report notes, house prices have risen by 50% during the last five years on an inflation-adjusted basis although they have come off the boil during the last 12 months due to taxes on foreign buyers and on vacant apartments.Vancouver, which has not suffered a fall of more than 15% in house prices in a year since 1981, has also sought to dissuade foreign buyers. However, the report warns, foreign buyers may start to look on Canada as attractive once again following the recent fall in the Canadian dollar.
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