Global Fall in House Prices: Only Zurich and Tokyo Resist

Over the past year, the world's 25 largest cities have seen a sharp decline in house prices. According to research by UBS, only Zurich and Tokyo bucked the trend.

According to the Swiss bank's report, housing market imbalances around the world have been driven by factors such as Russia's invasion of Ukraine and the Covid-19 pandemic, as well as a global increase in inflation and interest rates over the past two years.

UBS's latest 'Global Real Estate Bubble Index' report shows that real house prices have fallen by 5 percent on average and this downward trend is set to continue. In particular, the risk of a real estate bubble in cities hit during the financial crisis in 2008 has diminished significantly.

The biggest declines were in cities such as Frankfurt and Toronto, both of which saw prices fall by 15 percent. These two cities had the highest risk scores in last year's report.

According to UBS, further price increases are not expected, given that the supply of available housing has returned to pre-pandemic levels due to an increase in financing costs.

According to the report, although there have been price corrections in cities such as Paris and London, it was emphasized that prices are not enough to significantly improve access to housing. In Paris and London, prices are still disconnected from wages, and the purchase of a 60-square-meter house still means 10 years of salary for a skilled worker in the service sector.

UBS suggests that if interest rates remain at current high levels, prices are likely to fall further, even if the housing deficit can improve.