UBS' Global Real Estate Bubble Index* report for 2017 doesn't view San Francisco as being exposed to a "bubble risk" - instead, it is characterized as "overvalued", the most overvalued in U.S.A., to be exact.
While U.S. housing prices remain below their 2008 peak in real terms, San Francisco's housing prices increased by a remarkable +65% since 2011. Per UBS, the city shows signs of overvaluation but no bubble risk, given its strong economic fundamentals amid the astonishing boom of tech companies.
Los Angeles is in overvalued territory, too, as prices climbed twice as fast as the national average since 2012. Meanwhile, real price growth in Boston has remained close to the national average of 15% in the last four years, while New York and Chicago, oriented toward the financial sector and more traditional industries, have been outpaced by the overall U.S. market. Overall, New York and Boston seem fairly valued while Chicago undervalued, UBS says.
Globally, bubble risk seems greatest in Toronto, where it has increased significantly in the last year. Stockholm, Munich, Vancouver, Sydney, London and Hong Kong all remain in risk territory, with Amsterdam joining this group after being overvalued last year.
For further details, please download a copy of the enclosed report.
*UBS: the term “bubble” refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts. Typical signs include a decoupling of prices from local incomes and rents, and distortions of the real economy, such as excessive lending and construction activity. The UBS Global Real Estate Bubble Index gauges the risk of a property bubble on the basis of such patterns. Vastly overvalued housing markets, as measured by the UBS Global Real Estate Bubble Index, have historically been associated with a significantly heightened probability of correction and greater downside than housing markets whose prices developed more in line with the local economy.
With best wishes,
Associate Broker, Pricing Strategy Advisor (PSA®)
CalBRE No: 01445813
c: +1 (415) 601-0926
Disclaimer: Information provided herein was derived from public sources deemed reliable, it is intended for information purposes only, may contain errors and is subject to revision