Vidya Krishnakumar SVP of Data Science, Analytics and Experimentation | realtors.com
Miami has been identified as the most overvalued housing market globally, according to a report released on Tuesday by investment bank and financial services company UBS.
The Florida city, characterized by wealthy home buyers, a shortage of high-end homes in prime locations, and its comparative value, has seen prices driven up for years. It now holds the highest bubble risk rating among the 25 major metropolitan centers analyzed in UBS's Global Real Estate Bubble Index.
Miami has experienced significant price growth, particularly since the onset of the pandemic. Prices are nearly 50% higher than at the end of 2019, despite a slight cooling due to higher mortgage rates.
"Price rises in recent years have strongly decoupled from income and rental growth, leading to significant imbalances in the residential property market and a high bubble risk," according to UBS.
Additionally, an increasing supply of homes for sale could "potentially lead to some price erosion." Rising insurance costs and concerns about rising sea levels further complicate Miami’s future price stability. "Puts the future of Miami’s price levels into question," noted the report.
The term "bubble" is defined by UBS as a "substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts."
High bubble risks are also observed in Tokyo and Zurich. Elevated risks are evident in Los Angeles, Toronto, and Geneva.
Overall, housing bubble risks in cities analyzed by UBS have decreased slightly for the second consecutive year. However, from a regional perspective, "the picture is more nuanced," stated the report. "Imbalances have generally declined further in Europe, remained stable in Asia-Pacific, and increased in the U.S."
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