Global bank raises Sydney housing bubble fears

Adam Smith 28 September 2016

housing bubble handSydney has ranked fourth on a list of the top global cities at risk of a housing bubble.

The UBS Global Real Estate Bubble Index for 2016 saw Sydney fall one spot from third to fourth in cities the Swiss bank predicts are at risk of a housing bubble. Vancouver leapfrogged Sydney, Hong Kong and London - the top three cities in the 2015 report - to take the top spot. London was ranked second-most at-risk of a housing bubble, while Stockholm was ranked third.

UBS said loose monetary policy around the world was fuelling new housing bubbles in the cities on the list.

“The weak economic foundations of the latest price boom make the housing markets in those cities vulnerable,” the report said.

The bank forecast that a change in macroeconomic momentum, investor sentiment or housing supply could see house prices decline rapidly. Regardless, UBS said house prices were not likely to grow.

Australia headed for housing correction

“Investors in overvalued markets should not expect real price appreciation in the medium to long run,” the bank said.

While Sydney may have fallen a spot on the bank’s list, UBS still classified the city as overvalued versus market fundamentals.

“Sydney‘s housing market has been overheating since the city became a target for Chinese investors several years ago. While Sydney showed the lowest index score of all our covered APAC cities in 2012, the market now ranks in the bubble risk category and tops all other cities in the region,” the report said.

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