The global risk of housing booms has dropped dramatically in 2023. UBS released a report on Wednesday that concluded only two cities out of 25 were at risk for a housing boom this year. This is down from the nine in each of the two previous reports. Tel Aviv and Hong Kong are among the places that have been known for having high housing prices for years. They were classified as being overpriced. As a result, inflation-adjusted home prices in international markets experienced their sharpest decline since the global financial crisis of 2008. The report states that especially the most unaffordable markets couldn’t take the added pressure from increased interest and slumped.
This chart shows index scores for housing bubble risk in selected cities in 2023 (More than
Decline all around
In some cities, the decline of housing bubble risk started earlier than 2023. Hong Kong, which has been ranked among the top cities with regard to housing bubbles, dropped from rank 1 in 2010 to 5 by 2022, and 6 by this year, leaving bubble territory quicker than other cities. This is due to a compounded crisis of downward pressures not restricted to high interest, in this case demand gaps due to isolating Covid-19 restrictions, economic turmoil in Mainland China as well as an aging society.
Miami remained the highest-ranked U.S. city in 2023–at a score of 1.38 rated just 0.13 index points below bubble risk territory. Miami also experienced only very minor changes from 2022, unlike other cities that are now much lower in the ranking. Miami’s housing prices have been increasing faster than the average in the United States. The relative strength of the city’s housing market can be explained by its comparably low income-to-house-price levels and population influx to the U.S. sun belt. New York and San Francisco have been reclassified as fair-valued after experiencing deflators for Covid-19, quality-of-life and interest. Los Angeles is the only housing market in the U.S. other than Miami that UBS views as overvalued, but it has also become more affordable since last year.