In the cities discussed in this article, real estate is the most overvalued in the world. So read on…
Nowhere else in the world is valuation of the local real estate more overvalued than in Hong Kong, says a report by Swiss bank UBS Group on real estate prices in twenty financial centers around the world. The top five most overvalued cities are Hong Kong, Munich in Europe, Toronto, Vancouver both in Canada and Amsterdam in Europe as well. On the other hand, only Chicago has been estimated as undervalued and in this city, buyers can therefore still make interesting transactions.
However, overall, prices in most of the 20 cities have increased significantly less in the last four quarters than in previous years.
Prices that have increased on average by 35% in major cities over the last five years have contributed to an accessibility crisis, the report says. Most households can no longer afford to buy real estate in the best financial centers without a substantial inheritance.
Nevertheless, the risks are more limited than what they were prior to the global financial crisis, as mortgages progressed more slowly than during this period. Likewsie in loans and construction are both growing much more moderately.
The volume of real estate loans in circulation is growing at half the rate before the financial crisis began, according to Mark Haefele, Investment Director at UBS Global Wealth Management. Although the threat of a real estate bubble remains real in a number of financial centers, no comparison can be made with the situation before the outbreak of the financial crisis ten years ago.
Investors should remain cautious in sone of the most overheated real estate markets like as Hong Kong, Toronto and some parts of London. Over the past period, the first loopholes in the global housing boom have appeared.
During the past four quarters, real estate prices – adjusted for inflation – have risen by only 3.5 per cent in several major cities. It is a lot less than in previous years, but the numbers are still above average over a ten-year period, according to the report.
However, an explosive upward trend was evident in the largest economies of the euro area, as well as in Hong Kong and Vancouver.
In half of the cities that faced a bubble risk last year – Sydney, Stockholm, London and Toronto – real estate prices have fallen. In London, Stockholm and Sydney, the losses were more than 5%.
In Sydney, among other things, tighter credit conditions and higher interest rates have put a sharp end to higher prices and Geneva is also moving towards a more normal price.
The researchers also note that Hong Kong residents must do their best to become real estate owners. It will take an average of twenty-two years for a Hong Kong resident to buy an apartment of sixty square meters, the report says. In London, which occupies the second place, this period falls down to fifteen years.
Of all top 20 financial market capitals, Chicago is the most affordable.
And its financial market predominance is not expected to go away any time soon, as its futures markets are there to stay for the long-run. Unlike cities like London that can suffer from regional political and economical turmoil like brexit, the CBOT and other futures market based in Chicago are not subject to such vagaries.
Consult a specialist like D.J. Paris from Kale Realty for more information about where to find the best real estate investment opportunities in Chicago. Kale Realty is one of the largest real estate broker in the Chicago area and their family-owned business has been running for 63 years already.