Markets
Real Estate Bubbles: The 8 Global Cities at Risk
Note: cities with “Bubble Risk” (>1.5) are shown in red.
Courtesy: UBS
Real Estate Bubbles: The 8 Global Cities at Risk
If you had $1 billion to spend on safe real estate assets, where would you look to buy?
For many funds, financial institutions, and wealthy individuals, the perception is that the world’s financial centers are the places to be. After all, world-class cities like New York, London, and Hong Kong will never go out of style, and their extremely robust and high-density city centers limit the supply of quality assets to buy.
But what happens when too many people pile into a “safe” asset?
According to UBS, certain cities have seen prices rise at rates that are potentially not sustainable – and eight of these financial centers are at risk of having real estate bubbles that could eventually deflate.
Global Real Estate Bubble Index
Every year, UBS publishes the Global Real Estate Bubble Index, and the most recent edition shows several key markets in bubble territory.
The bank highlights Toronto as the biggest potential bubble risk, noting that real prices have doubled over 13 years, while real rents and real income have only increased 5% and 10% respectively.
However, the largest city in Canada was certainly not the only global financial center with real estate appreciating at rapid rates in the last year.
In Munich, Toronto, Amsterdam, Sydney and Hong Kong, prices rose more than 10% in the last year alone.
Annual increases at a 10% clip would lead to the doubling of prices every seven years, something the bank says is unsustainable.
In the last year, there were three key markets where prices did not rise: London, Milan, and Singapore.
London is particularly notable, since it holds more millionaires than any other city in the world and is rated as the #1 financial center globally.
Markets
Visualizing Portfolio Return Expectations, by Country
This graphic shows the gap in portfolio return expectations between investors and advisors around the world, revealing a range of market outlooks.

Visualizing Portfolio Return Expectations, by Country
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How do investors’ return expectations differ from those of advisors? How does this expectation gap shift across countries?
Despite 2022 being the worst year for stock markets in over a decade, investors around the world appear confident about the long-term performance of their portfolios. These convictions point towards resilience across global economies, driven by strong labor markets and moderating inflation.
While advisors are optimistic, their expectations are more conservative overall.
This graphic shows the return expectation gap by country between investors and financial professionals in 2023, based on data from Natixis.
Expectation Gap by Country
Below, we show the return expectation gap by country, based on a survey of 8,550 investors and 2,700 financial professionals:
Long-Term Annual Return Expectations | Investors | Financial Professionals | Expectations Gap |
---|---|---|---|
🇺🇸 U.S. | 15.6% | 7.0% | 2.2X |
🇨🇱 Chile | 15.1% | 14.5% | 1.0X |
🇲🇽 Mexico | 14.7% | 14.0% | 1.1X |
🇸🇬 Singapore | 14.5% | 14.2% | 1.0X |
🇯🇵 Japan | 13.6% | 8.7% | 1.6X |
🇦🇺 Australia | 12.5% | 6.9% | 1.8X |
🇭🇰 Hong Kong SAR | 12.4% | 7.6% | 1.6X |
🇨🇦 Canada | 10.6% | 6.5% | 1.6X |
🇪🇸 Spain | 10.6% | 7.6% | 1.4X |
🇩🇪 Germany | 10.1% | 7.0% | 1.4X |
🇮🇹 Italy | 9.6% | 6.3% | 1.5X |
🇨🇭 Switzerland | 9.6% | 6.9% | 1.4X |
🇫🇷 France | 8.9% | 6.6% | 1.3X |
🇬🇧 UK | 8.1% | 6.2% | 1.3X |
🌐 Global | 12.8% | 9.0% | 1.4X |
Investors in the U.S. have the highest long-term annual return expectations, at 15.6%. The U.S. also has the highest expectations gap across countries, with investors’ expectations more than double that of advisors.
Likely influencing investor convictions are the outsized returns seen in the last decade, led by big tech. This year is no exception, as a handful of tech giants are seeing soaring returns, lifting the overall market.
From a broader perspective, the S&P 500 has returned 11.5% on average annually since 1928.
Following next in line were investors in Chile and Mexico with return expectations of 15.1% and 14.7%, respectively. Unlike many global markets, the MSCI Chile Index posted double-digit returns in 2022.
Global financial hub, Singapore, has the lowest expectations gap across countries.
Investors in the UK and Europe, have the most moderate return expectations overall. Confidence has been weighed down by geopolitical tensions, high interest rates, and dismal economic data.
Return Expectations Across Asset Classes
What are the expected returns for different asset classes over the next decade?
A separate report by Vanguard used a quantitative model to forecast returns through to 2033. For U.S. equities, it projects 4.1-6.1% in annualized returns. Global equities are forecast to have 6.4-8.4% returns, outperforming U.S. stocks over the next decade.
Bonds, meanwhile, are forecast to see 3.6-4.6% annualized returns for the U.S. aggregate market, while U.S. Treasuries are projected to average 3.3-4.3% annually.
While it’s impossible to predict the future, we can see a clear expectation gap not only between countries, but between advisors, clients, and other models. Factors such as inflation, interest rates, and the ability for countries to weather economic headwinds will likely have a significant influence on future portfolio returns.
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