São Paulo still has the lowest risk of a real estate bubble. (Image: Getty Images/ Canva Pro)
A city of Sao Paulo stood out in the latest report of UBS Global Real Estate Bubble Index for appearing among the locations with the most “fair” price for properties and with the lowest risk of facing the dreaded real estate bubble. Despite this, the bank highlighted that renting a property remains financially more attractive than owning your own home.
The government’s expansionary fiscal policy has contributed to robust economic growth, which, according to the bank, has generated more demand for housing in desirable areas. This has caused prices to rise for the second consecutive year, indicating a slight recovery in the sector. However, UBS points out that real prices remain more than 20% below the peak recorded in late 2014.
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“Given that inflation remains high, there is a high probability of an increase in interest rates in the coming quarters, which limits the positive side of real residential property prices,” assesses the institution.
The minutes of the last meeting of the Monetary Policy Committee (Copom), released on Tuesday morning (24), maintained the tone hawkish already adopted in the statement
In the minutes, the Committee highlights that the resilience in activity, the pressures in the labor market, the positive output gap, the increase in projections for inflation and unanchored expectations demand a more contractionary monetary policy.
With high interest rates, renting has become a more financially attractive option than buying, the bank said. The growing demand for rentals has led to an increase in values, which has also affected the purchase price of properties.
Which cities are at risk of a housing bubble?
The study UBS Global Real Estate Bubble Index also assessed 24 other cities around the world and concluded that the risk of real estate bubbles has fallen slightly for the second year in a row. Even so, one city tops the risk score: Miami.
Since the end of 2019, property prices in Miami have increased by almost 50%, and in the last year alone, they have increased by 7%. The US city has been receiving special attention from high-income consumers competing for beachfront properties, driving up purchase and rental prices. In addition, UBS points out that the significant volume of speculative transactions increases the risk of a price correction.
Just below Miami, also in the high-risk category, were the cities of Tokyo, in second place, and Zurich, in third.
Overall, the report found that imbalances narrowed in Europe, remained stable in Asia-Pacific and increased in the US. Meanwhile, Dubai saw its largest increase in risk since mid-2023.
“Over the past four quarters, home prices have increased by almost 17% and are 40% higher than in 2020. Income growth has been robust and rent growth has outpaced even price growth, keeping yields relatively high. So the risk of a bubble is in moderate territory, but has increased considerably since mid-2023,” explains UBS.
See the ranking
| City | Use | Risk |
|---|---|---|
| Miami | 1,79 | alto |
| Tokyo | 1,67 | alto |
| Zurich | 1,51 | alto |
| Los Angeles | 1,17 | High |
| Toronto | 1,03 | High |
| Geneva | 1,00 | High |
| Amsterdam | 0,98 | Moderate |
| Sydney | 0,78 | Moderate |
| Boston | 0,78 | Moderate |
| Vancouver | 0,77 | Moderate |
| Frankfurt | 0,75 | Moderate |
| Hong Kong | 0,74 | Moderate |
| Tel Aviv | 0,69 | Moderate |
| Dubai | 0,64 | Moderate |
| Singapore | 0,59 | Moderate |
| Madrid | 0,56 | Moderate |
| Munich | 0,54 | Moderate |
| San Francisco | 0,48 | Low |
| London | 0,41 | Low |
| New York | 0,37 | Low |
| Paris | 0,35 | Low |
| Stockholm | 0,32 | Low |
| Warsaw | 0,23 | Low |
| Milan | 0,20 | Low |
| São Paulo | 0,04 | Low |