The current UBS Global Real Estate Bubble Index 2026, which analyses residential property prices in 23 international metropolises, places Zurich and Tokyo in the highest risk category for a real estate bubble. This assessment is based on a comprehensive investigation of market imbalances. Miami, which topped the list in previous years, has now fallen back into the elevated risk category. Dubai, Seoul, Geneva and Lisbon also show an elevated risk, with Lisbon and Seoul included in the study for the first time.
A moderate real estate bubble risk was identified for Los Angeles, Sydney, Toronto, Vancouver, Hong Kong and Singapore. In Europe, Amsterdam, Madrid, Frankfurt, Munich and Milan fall into this category. Paris and London, however, are classified as markets with a low bubble risk. Outside Europe, only New York, San Francisco and São Paulo show a low bubble risk. Lisbon and Seoul experienced the strongest increase in market imbalances over the past year. Risks also increased overall in Milan, Hong Kong, Madrid and Dubai, although Dubai recorded a slight decrease in its index value since March.
Impact of Financing Costs and Price Developments
In Switzerland, low financing costs exacerbated imbalances in Zurich and Geneva. In contrast, imbalances reduced in Tokyo and Sydney, while remaining stable in Singapore. North American cities saw a decline in bubble risk as high financing costs negatively affected affordability and dampened housing demand. Frankfurt and Amsterdam, in particular, recorded the most significant decreases in index values in Europe, attributable to the braking effect of persistently high interest rates.
Inflation-adjusted property prices for owner-occupied homes, as well as rents and incomes, largely stagnated over the past year, but showed significant urban differences. For example, real house prices rose by approximately 10 per cent in Seoul, Lisbon, Madrid and Hong Kong. In contrast, they fell by around 10 per cent in Vancouver and Toronto. Frankfurt and Munich also recorded price declines, albeit to a lesser extent.
Matthias Holzhey, lead author of the study and economist at UBS Global Wealth Management, noted that increased and, in some cases, rising financing costs are limiting the potential for price increases, at least in the short term. The annual running costs of a 60-square-metre flat, including mortgage interest and maintenance, exceed 40 per cent of a highly qualified professional's gross income in most of the cities examined. This highlights the increasing pressure on affordability. The running costs for owner-occupied housing are currently significantly higher than the rental costs of comparable flats, particularly in cities such as Munich, Hong Kong and Sydney.
Regional Analyses and Future Perspectives
Owner-occupied property did not offer effective inflation protection in more than half of the cities surveyed over the past five years. Markets that belonged to the highest risk category in 2021 have since seen the strongest average real price declines of around 15 per cent. In cities with above-average inflation, real house prices fell by an average of about 5 per cent, while cities with below-average inflation achieved a real price increase of around 10 per cent over the same period.
Maciej Skoczek, also an author of the study and economist at UBS Global Wealth Management, expressed the view that residential property in most cities is likely to continue to offer inflation protection in the medium term. Demand for urban housing remains high, which is reflected in rental growth that often outpaced income growth. Persistent supply shortages support this forecast.
- —Zurich: The city recorded the strongest increase in house prices among the surveyed cities over the past 20 years. High locational attractiveness, the influx of international skilled workers, low interest rates and supply shortages exacerbate price pressure. The ratio of property prices to rents shows a strong dependence on favourable financing costs.
- —Tokyo: After a period of high price increases that outpaced income growth, the housing market is in the highest risk category. Affordability is increasingly deteriorating. Rising housing costs are shifting demand to suburbs and the rental market, and further increases in financing costs could heighten bubble risk.
- —Lisbon: Measures to attract foreign capital and new residents significantly contributed to imbalances here.
