View of private residential properties in Singapore.
Singapore, along with Milan and Boston, were deemed fairly valued by UBS Group in its Global Real Estate Bubble Index.
The 20-city index listed Chicago as the only undervalued housing market, reported Bloomberg. 10 cities, including New York, Tokyo and Sydney, were considered overvalued, while six were in bubble-risk territory, with the housing market in Hong Kong being the most inflated.
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According to the report, typical signs of a bubble include property prices increasing out of sync with incomes and economic imbalances, such as excessive construction and lending activity.
But unlike the boom during the mid-2000s, no evidence of simultaneous excesses in construction and lending were seen, while outstanding mortgage volumes were rising at around half the rate of the pre-crisis period.
“Although many financial centres remain at risk of a housing bubble, we should not compare today’s situation with pre-crisis conditions,” said UBS Global Wealth Management chief investment officer Mark Haefele.
The Swiss bank’s report noted that affordability continued to be a key concern even though prices are not growing as fast as in previous years. In fact, most cities saw house prices increase 35 percent on average over the last five years.
Moreover, incomes are not rising fast enough to keep pace with prices in most areas. In Hong Kong, for instance, it would take 22 years of the average annual income for a skilled service worker to acquire a 60 sq m apartment near the city centre. This is a significant increase from 12 years a decade ago.
Buying real estate in other cities is more feasible – at 5.7 years of annual income in Milan and under five years in Boston, Chicago and Los Angeles.
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Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email email@example.com