Many of the most attractive housing markets in the world are vastly overpriced.
That’s according to Mark Haefele, who overseas the investment policy and strategy for $2 trillion as UBS’s global chief investment officer.
“Among the 15 international cities we analysed, only Chicago appears undervalued,” he wrote.
New York and Boston were considered fair-valued, leaving 12 of the 15 cities surveyed overvalued.
London and Hong Kong are the two most extreme examples of overvalued housing markets, with Hong Kong’s real-estate prices nearly 200% above 2003 levels despite stagnant rent and income. In London, home prices have risen 40% since 2013 — putting both cities at risk of a housing bubble.
“Real estate is not only illiquid but also offers poor value in many major global cities … property markets look frothy in many cities of the world,” Haefele wrote. “The results indicate an elevate risk of a significant correction in housing prices in London and Hong Kong to name just two examples.”
The report added that house prices in Zurich, Vancouver, Hong Kong, Geneva, Singapore, Paris, London, and Sydney are vulnerable to “sharp corrections.”
“We have recommended other destinations for money currently earning meager yields in government bonds, such as hedge funds,” Haefele wrote. “An alternative we recommend to clients looking for longer-term investments is exposure to structural trends, such as cancer therapeutics, clean air, or emerging market healthcare.”
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