Real Estate

Ranked: The Cities With the Most Bubble Risk in Their Property Markets

Published

1 month ago

October 26, 2023

Pallavi Rao

A map showing the bubble-risk rating of 25 major property markets along with a bar chart showing housing price growth YoY.

Which Cities Have Bubble Risk in Their Property Markets?

Buoyed by low interest rates for the last decade, many property markets have seen substantial price growth since 2010. Experts warned that real estate bubbles—in which the price of assets moved up far beyond their intrinsic value—were forming.

The UBS Global Real Estate Bubble Index analyzes the real estate market of 25 major cities across the globe and assigns them a score between -0.5 to 2.0 to convey bubble risk. The higher the score, the more imbalanced the market is, with those above 1.5 in “bubble-risk” territory.

We visualize the data in the above map, along with charting the real property price changes in the last year.

Ranking Bubble Risk by City

At the top of UBS’ findings is Switzerland’s financial capital Zurich, with a 1.71 score, putting the city firmly in the bubble-risk zone. With its high-income earners and the country’s low interest rates, the city has been steadily climbing the real estate bubble-risk rankings, 5th in 2021, to 3rd in 2022, to the top spot this year.

Unlike many of its former peers in the risky territory, local prices adapted to increased mortgage rates this year, and have stayed elevated.

Here’s the full rankings for bubble risk in all 25 property markets:

Rank	City	Index Score	Rating
1	🇨🇭 Zurich	1.71	Bubble-Risk
2	🇯🇵 Tokyo	1.65	Bubble-Risk
3	🇺🇸 Miami	1.38	Overvalued
4	🇩🇪 Munich	1.35	Overvalued
5	🇩🇪 Frankfurt	1.27	Overvalued
6	🇭🇰 Hong Kong	1.24	Overvalued
7	🇨🇦 Toronto	1.21	Overvalued
8	🇨🇭 Geneva	1.13	Overvalued
9	🇺🇸 Los Angeles	1.03	Overvalued
10	🇬🇧 London	0.98	Overvalued
11	🇮🇱 Tel Aviv	0.93	Overvalued
12	🇨🇦 Vancouver	0.81	Overvalued
13	🇳🇱 Amsterdam	0.80	Overvalued
14	🇸🇪 Stockholm	0.74	Overvalued
15	🇫🇷 Paris	0.73	Overvalued
16	🇦🇺 Sydney	0.67	Overvalued
17	🇮🇹 Milan	0.49	Fair-Valued
18	🇺🇸 New York	0.47	Fair-Valued
19	🇸🇬 Singapore	0.47	Fair-Valued
20	🇪🇸 Madrid	0.46	Fair-Valued
21	🇺🇸 Boston	0.34	Fair-Valued
22	🇺🇸 San Francisco	0.27	Fair-Valued
23	🇦🇪 Dubai	0.14	Fair-Valued
24	🇧🇷 São Paulo	0.09	Fair-Valued
25	🇵🇱 Warsaw	-0.28	Fair-Valued

Tokyo (1.65) is the second and final entry in the real estate markets with immediate bubble risk. This is a decrease from nine total cities in that category last year.

In fact the other seven real estate markets which scored above 1.5 in 2022 have all seen significant real property price drops, many of them in the double-digits, which has moved them into “overvalued territory.”

These include: Frankfurt (-15.9%), Toronto (-14.7%), Amsterdam (-14.0%), Munich (-13.8%), Vancouver (-10.6%), Hong Kong (-7.1%), and Tel Aviv (-0.7%).

The key driver of these price drops across the board are the aggressive interest rate hikes to counter rising inflation, which pushed many housing markets into unaffordability, forcing sellers to lower their prices.

However, a few cities have seen real property price increases, including the aforementioned Tokyo and Zurich.

Here’s UBS’ full ranking of real property price changes between 2022–2023.

Rank	City	Real Property Price Growth (YoY)
1	🇦🇪 Dubai	+14.6%
2	🇺🇸 Miami	+6.0%
3	🇯🇵 Tokyo	+3.6%
4	🇺🇸 New York	+3.2%
5	🇪🇸 Madrid	+2.9%
6	🇸🇬 Singapore	+2.8%
7	🇨🇭 Zurich	+1.5%
8	🇧🇷 São Paulo	+1.4%
9	🇨🇭 Geneva	-0.1%
10	🇮🇱 Tel Aviv	-0.7%
11	🇮🇹 Milan	-1.9%
12	🇺🇸 Boston	-3.4%
13	🇺🇸 Los Angeles	-3.7%
14	🇭🇰 Hong Kong	-7.1%
15	🇫🇷 Paris	-7.9%
16	🇵🇱 Warsaw	-9.3%
17	🇦🇺 Sydney	-10.5%
18	🇨🇦 Vancouver	-10.6%
19	🇺🇸 San Francisco	-10.6%
20	🇩🇪 Munich	-13.8%
21	🇬🇧 London	-13.9%
22	🇳🇱 Amsterdam	-14.0%
23	🇨🇦 Toronto	-14.7%
24	🇩🇪 Frankfurt	-15.9%
25	🇸🇪 Stockholm	-22.1%

A significant outlier within this group, Dubai, has registered double-digit growth property price growth. This was fueled by expanding household incomes—thanks to an economic boom from oil prices—as well as increased immigration by wealthy individuals.

Ranked: Cities With Rising Rental Prices

However, even as property prices have cooled in the majority of the analyzed real estate market, the rental market for many cities, like Vancouver (+10.7%) and Toronto (+6.0%) has moved swiftly in the opposite direction.

A bar chart showing rental price growth (YoY) in 25 major property markets around the world.

In this case, inflation is a key reason as well—pushing up incomes, in turn leading to rising rents. Furthermore, owners-occupants with tenants seek to pass on higher mortgage costs in an effort to reduce their financial burden.

Where Does This Data Come From?

Source: UBS Global Real Estate Index (2023).

Note: The term “bubble” refers to a substantial and sustained mispricing of an asset, the existence of which cannot be proved unless it bursts. But historical data reveals patterns of property market excesses. Typical signs include a decoupling of prices from local incomes and rents, and imbalances in the real economy, such as excessive lending and construction activity. The UBS Global Real Estate Bubble Index gauges the risk of a property bubble on the basis of such patterns. The index does not predict whether and when a correction will set in. A change in macroeconomic momentum, a shift in investor sentiment or a major supply increase could trigger a decline in house prices.

Related Topics:amsterdam toronto germany dubai rental prices housing prices tokyo real estate bubbles frankfurt property markets interest rate hikes 2023 inflation Zurich bubble risk index Munich Tel Aviv canada vancouver Housing Market japan switzerland hong kong

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Personal Finance

Mapped: What You Need to Earn to Own a Home in 50 American Cities

What does it take to own a home in the U.S. in 2023? Here’s a look at the salary needed for home ownership in the top 50 metro areas.

Published

2 months ago

October 16, 2023

Pallavi Rao

A cropped map of the U.S. with the median home price as well as the salary needed to own a home 50 American cities.

What You Need to Earn to Own a Home in 50 American Cities

Once a fundamental part of the American dream, the ability to own a home is drifting farther and farther away for many Americans.

Between skyrocketing prices, stagnating wages, and now rising interest rates, the deck seems to be increasingly stacked against home ownership.

Using May 2023 data tabulated by Home Sweet Home, we map out the annual salary needed to afford a 30-year mortgage (at 6.37%) to buy a home in America’s 50 most populous metropolitan areas.

The monthly minimum mortgage payment includes taxes and insurance as well, and is capped at roughly one-third of the income. This analysis also assumes that the homeowner will put down a 20% down payment.

The Least and Most Affordable American Cities to Own a Home

At the top of the list, and at the very west of the country, San Jose is the least affordable city to own a home for the average American.

One would have to earn at least $374,000 a year to afford a $1.6 million dollar home in the city.

To put those numbers into perspective, the median American annual income is $75,000, about one-fifth what’s required to buy a home in San Jose.

Here’s a look at the annual earnings needed to afford a home in all 50 largest cities in the U.S., ranked from least to most affordable.

Rank	Metro Area	State	Median Home Price	Annual Salary
1	San Jose	California	$1,618,400	$373,696
2	San Francisco	California	$1,192,600	$282,167
3	San Diego	California	$880,000	$209,110
4	Los Angeles	California	$746,800	$181,106
5	Seattle	Washington	$699,300	$170,340
6	Boston	Massachusetts	$644,400	$165,239
7	New York City	New York	$577,300	$160,233
8	Denver	Colorado	$636,100	$150,622
9	Washington, D.C.	N/A	$557,200	$139,911
10	Miami	Florida	$560,000	$137,574
11	Portland	Oregon	$556,800	$136,147
12	Riverside/San Bernardino	California	$550,000	$133,607
13	Austin	Texas	$467,900	$128,995
14	Sacramento	California	$500,000	$125,304
15	Salt Lake City	Utah	$522,700	$122,717
16	Providence	Rhode Island	$417,000	$112,281
17	Orlando	Florida	$419,900	$104,772
18	Dallas	Texas	$372,400	$103,460
19	Phoenix	Arizona	$439,700	$103,112
20	Raleigh	North Carolina	$420,000	$102,572
21	Las Vegas	Nevada	$431,400	$101,310
22	Tampa	Florida	$390,000	$97,387
23	Minneapolis	Michigan	$361,500	$94,466
24	Hartford	Connecticut	$314,900	$93,861
25	Charlotte	North Carolina	$387,200	$93,735
26	Jacksonville	Florida	$370,000	$93,422
27	Baltimore	Maryland	$357,800	$93,378
28	Nashville	Tennessee	$385,800	$93,168
29	Chicago	Illinois	$321,000	$92,868
30	Houston	Texas	$327,000	$91,826
31	Milwaukee	Wisconsin	$339,600	$89,752
32	Atlanta	Georgia	$354,300	$89,198
33	Richmond	Virginia	$362,300	$88,769
34	San Antonio	Texas	$320,500	$88,683
35	Philadelphia	Pennsylvania	$315,300	$87,293
36	Virginia Beach	Virginia	$313,200	$79,336
37	Kansas City	Missouri	$291,000	$76,147
38	Columbus	Ohio	$284,700	$76,133
39	Indianapolis	Indiana	$289,300	$71,409
40	New Orleans	Louisiana	$265,200	$68,946
41	Memphis	Tennessee	$268,600	$68,005
42	Birmingham	Alabama	$276,500	$67,773
43	Cincinnati	Ohio	$252,200	$66,260
44	Buffalo	New York	$206,800	$63,386
45	St Louis	Missouri	$231,100	$63,260
46	Detroit	Michigan	$227,000	$62,758
47	Louisville	Kentucky	$246,000	$62,741
48	Oklahoma City	Oklahoma	$227,300	$62,161
49	Cleveland	Ohio	$191,400	$55,515
50	Pittsburgh	Pennsylvania	$175,000	$50,316
	National		$371,200	$97,204

Other Californian cities, San Francisco (ranked 2nd), San Diego (3rd), and Los Angeles (4th) all require an annual income of at least $180,000 to attempt home ownership within their metropolitan boundaries.

Boston (ranked 6th) and New York (ranked 7th) represent unaffordability on the East Coast, both requiring at least $160,000 a year to buy homes there.

It’s not just the coasts that are expensive however. To buy a home in Denver (ranked 8th) and Salt Lake City (15th) means earning more than $120,000 a year.

However, cities in the Midwest and South, like Pittsburgh, Detroit, Oklahoma City, and Louisville, are far more affordable, requiring less than $63,000 a year to buy a home.

Interest Rates Rock Home Ownership Chances

Aside from the obvious price differences in housing markets, a key factor that has elevated income requirements across the board is the rapid rise in interest rates in the last year. In fact the average 30-year mortgage has pushed past 7%, the highest it’s been since the 2000s.

This means that while the median price of a house in San Jose has actually come down between 2022 and 2023, the minimum monthly payment has increased from $7,717 to $8,720 this year.

Rank	Metro Area	State	Median Home Price	Monthly Payment
1	San Jose	California	$1,618,400	$8,720
2	San Francisco	California	$1,192,600	$6,584
3	San Diego	California	$880,000	$4,879
4	Los Angeles	California	$746,800	$4,226
5	Seattle	Washington	$699,300	$3,975
6	Boston	Massachusetts	$644,400	$3,856
7	New York City	New York	$577,300	$3,739
8	Denver	Colorado	$636,100	$3,515
9	Washington, D.C.	N/A	$557,200	$3,265
10	Miami	Florida	$560,000	$3,210
11	Portland	Oregon	$556,800	$3,177
12	Riverside/San Bernardino	California	$550,000	$3,118
13	Austin	Texas	$467,900	$3,010
14	Sacramento	California	$500,000	$2,924
15	Salt Lake City	Utah	$522,700	$2,863
16	Providence	Rhode Island	$417,000	$2,620
17	Orlando	Florida	$419,900	$2,445
18	Dallas	Texas	$372,400	$2,414
19	Phoenix	Arizona	$439,700	$2,406
20	Raleigh	North Carolina	$420,000	$2,393
21	Las Vegas	Nevada	$431,400	$2,364
22	Tampa	Florida	$390,000	$2,272
23	Minneapolis	Michigan	$361,500	$2,204
24	Hartford	Connecticut	$314,900	$2,190
25	Charlotte	North Carolina	$387,200	$2,187
26	Jacksonville	Florida	$370,000	$2,180
27	Baltimore	Maryland	$357,800	$2,179
28	Nashville	Tennessee	$385,800	$2,174
29	Chicago	Illinois	$321,000	$2,167
30	Houston	Texas	$327,000	$2,143
31	Milwaukee	Wisconsin	$339,600	$2,094
32	Atlanta	Georgia	$354,300	$2,081
33	Richmond	Virginia	$362,300	$2,071
34	San Antonio	Texas	$320,500	$2,069
35	Philadelphia	Pennsylvania	$315,300	$2,037
36	Virginia Beach	Virginia	$313,200	$1,851
37	Kansas City	Missouri	$291,000	$1,777
38	Columbus	Ohio	$284,700	$1,776
39	Indianapolis	Indiana	$289,300	$1,666
40	New Orleans	Louisiana	$265,200	$1,609
41	Memphis	Tennessee	$268,600	$1,587
42	Birmingham	Alabama	$276,500	$1,581
43	Cincinnati	Ohio	$252,200	$1,546
44	Buffalo	New York	$206,800	$1,479
45	St Louis	Missouri	$231,100	$1,476
46	Detroit	Michigan	$227,000	$1,464
47	Louisville	Kentucky	$246,000	$1,464
48	Oklahoma City	Oklahoma	$227,300	$1,450
49	Cleveland	Ohio	$191,400	$1,295
50	Pittsburgh	Pennsylvania	$175,000	$1,174
	National		$371,200	$2,268

So to afford a median-priced home in the country, an American needs to earn closer to $100,000 a year, up from $75,500 in 2022. And even then, they would be priced out of owning a home in nearly half of the 50 largest cities in the country.

As a result Americans may yet further delay home ownership. Renting is now a far more attractive option, thanks to the biggest difference between rent and mortgages in over 50 years.

Where Does This Data Come From?

Source: Home Sweet Home (HSH).

Note: HSH used different sources for their median home prices, mortgage rate, property taxes and home insurance figures for their analysis. Please visit their website for more information.

Other: If other personal debts exceed 8% of one’s given monthly gross income, this may increase the salary needed to qualify for a mortgage.