UBS Study: Zurich's Housing Market Reaches Astronomical Prices

Zurich, Switzerland, is currently facing a housing crisis of unprecedented proportions, according to a recent study conducted by UBS, a Swiss bank. The study, part of the Global Real Estate Bubble Index, reveals that Zurich is now the city most at risk of a housing bubble. What makes this situation even more alarming is that Zurich is not an isolated case; it is indicative of a larger global trend.

The study, aimed at identifying markets that are "mispriced" or at risk of experiencing a housing bubble, analyzed house prices in 25 major cities worldwide. UBS compared the average cost of buying a house in each city to rental costs, salaries, and average prices in the respective countries. Based on this comparison, an index score was generated, with scores of 0.5 to 1.5 indicating overvalued housing and scores of 1.5 or higher suggesting a serious risk of a housing bubble.

According to the findings, house prices have started to decline globally in 2023 due to increased interest rates on mortgages and inflation. Cities such as Frankfurt, Munich, and Amsterdam, previously considered at risk, are no longer in immediate danger of a housing bubble, although their housing markets remain overvalued. Notably, Frankfurt and Toronto, the two cities deemed most at risk in 2022, have seen a 15% fall in real house prices over the past year. However, despite the declining prices, the affordability of housing worldwide has worsened due to inflation. A skilled-service worker can now afford 40% less living space than before the pandemic.

Despite these global trends, Zurich stands out as a city where housing prices remain stubbornly overpriced. UBS identifies Zurich as the city most at risk of a housing bubble in 2023, closely followed by Tokyo, Japan. Notably, these two cities are now the sole representatives among the previously 9 at-risk cities in 2022. Geneva, another Swiss city, is considered to have an "overvalued" housing market as well. The study highlights that housing in Zurich has become significantly more expensive over the past decade. On average, real estate in the city now costs 50% more than it did ten years ago, with rental costs also experiencing a considerable increase.

Despite the high risk of a housing bubble, UBS predicts that a major price correction is unlikely to occur in Zurich. This is largely due to the fact that investors still regard property in the city as a safe investment, often referred to as "concrete gold." Moreover, experts note that the thriving job market in Zurich contributes to the region's high demand for housing. Despite the financial infeasibility for many locals to purchase a home, prices are expected to remain relatively elevated, as the demand is unlikely to decrease in the foreseeable future.

Based on the UBS study, the 10 cities worldwide most at risk of a housing bubble in 2023 are as follows: