UBS: “The housing market in Tel Aviv is out of balance – prices are on their way to a peak” – real estate


The Swiss investment bank UBS has released UBS’s global real estate bubble index for 2020, where it states that the housing market in the first Hebrew city has “gone out of balance” and is in the overestimation zone.

According to the bank, over the past 30 years Tel Aviv has experienced the highest price growth among the cities participating in this study. “Today, housing prices are rising again due to the easier financing conditions and the housing supply is expensive in reality. The government has reduced the purchase tax on second homes and thus encouraged investment in the housing market.”

According to Caroline Kunhart, Director of Central and Eastern Europe, Greece and Israel at UBS, Price increases are expected to continue in the medium term. “Despite the uncertainty in the short term, favorable financing conditions and limited housing supply are expected to preserve the rise in apartment prices. Although this means that the ability to purchase apartments is stretched to the limit, it is also a sign of Tel Aviv’s economic growth.”

What’s going on in the world?
The bank says, “The euro area stands out as the hottest housing market. Munich and Frankfurt are at the top of the table. Paris and Amsterdam are close behind, and are also marching in the bubble risk zone alongside the two German cities.”

“Similarly, Zurich, Toronto and Hong Kong are also showing great imbalance. Unlike last year, the Vancouver housing market is now within the spectrum’s overestimation range, sharing the same territory with London, San Francisco, Los Angeles, and to a lesser extent, New York.

“The estimate of housing prices in Boston, Singapore and Dubai has remained fair. The same is true of Warsaw, which was included in this study for the first time. Chicago still suffers from an underestimation, and lies alone at this end of the scale.

The reasons for price increases – after adjusting for inflation – have accelerated on average in the last four quarters. In many of the most prominent cities in Europe, prices have soared by more than 5%, with Munich, Frankfurt and Warsaw leading the way. Rising prices in cities in Asia and the Americas, with the exception of Sydney, remained in the low-to-medium single-digit range. Madrid, San Francisco, Dubai and Hong Kong are the only ones where prices have fallen. This is the lowest number of cities that have shown a negative price increase since 2006.

Why does the housing market remain stable?
UBS says that despite the corona, housing markets demonstrated resilience in the first half of 2020, due to 3 main reasons. First, housing prices are a retrospective economic indicator, and are able to reflect an economic downturn only after a certain delay.

Second, most potential home buyers did not suffer a direct impact on their income in the first half of 2020. The credit options offered to companies and short-term employment plans alleviated the damage of the crisis. Third, governments have demonstrated support for homeowners in many cities during periods of closure. Subsidies on housing increased, taxes were lowered, and foreclosure lawsuits were suspended.

According to The Bank’s Chief Investment Officer, Dark Soup “At the present point in time it is not known to what extent the rise in unemployment and the bleak outlook regarding household income will affect housing prices.

“But it is clear that the current acceleration will not be sustainable in the short term. Rents are already plummeting in most cities, indicating a possible correction phase after the subsidies evaporate and the pressure on revenues increases.”

“High market estimates and uncertain short-term expectations put the long-term urban housing path under focus. On the one hand, the main drivers of rising urban housing prices – excellent employment opportunities, quality services, low financing costs and limited supply growth – are still valid. “Second, the epidemic seems to have accelerated the change in the direction of population movement – from the cities to the wider metropolitan areas around them,” he said.

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