UBS study: Largest real estate bubble in Frankfurt

Status: 13.10.2021 1:42 p.m.

In Frankfurt, apartment prices have risen by ten percent annually since 2016. In no other big city is the real estate market as overheated as in the Main metropolis, says UBS.

Every year, the major Swiss bank UBS examines where the highest risk of a real estate bubble lies. To this end, it developed the “Global Real Estate Bubble Index”. After that, there is a risk of a bubble at a value of 1.5 points. UBS defines a real estate bubble as a strong and persistent discrepancy between the price level and fundamental data such as income, economic growth and population migration.

Housing prices have risen by ten percent annually

The surprising leader in the current “bubble ranking” is not Hong Kong, London, New York or Zurich, but Frankfurt am Main. The metropolis has the highest value for the period from mid-2020 to mid-2021 with 2.16 points. The UBS experts write that the residential property market in Frankfurt is more overheated than any other metropolitan region in the world.

According to calculations by UBS, real – i.e. adjusted for inflation – apartment prices in Frankfurt have risen by ten percent annually since 2016. At the same time, rents increased by around three percent per year.

Munich overtakes

Frankfurt has now overtaken Munich as the most overheated real estate market. A year ago, the risk of a real estate bubble was still highest in the Isar metropolis. In the meantime, UBS has given the all-clear: In Munich, price growth in the city has come to a standstill, and there has even been a slight rent correction. The growth is increasingly taking place in the suburbs.

Behind Frankfurt and Munich, London and New York land in this year’s “Global Real Estate Bubble Index”. The metropolises of Paris, Amsterdam, Stockholm, Zurich, Vancouver, Toronto and Hong Kong are also considered to be significantly overheated. Properties in Madrid, Milan and Warsaw are classified as “fair valued”.

However, if you look at how much of their income employees have to spend on a 60 square meter apartment close to the city center, Frankfurt and Munich are not doing so badly. In this respect, they are far behind Tokyo, Hong Kong, London and Paris.

Others are also warning of a bubble in Frankfurt

The real estate and consulting company Immoconcept also sees the risk of a real estate bubble. In a recent study, they found that purchase prices and rents have risen for the tenth year in a row. In the first half of the year alone, purchase prices have risen by 17 percent. Interested parties in Frankfurt wanted to buy a property in fear that it would be even more expensive tomorrow.

The real estate consultant Colliers reported today on record prices for condominiums in Frankfurt. In the new building, an average condominium now costs 8,000 euros per square meter, in existing buildings it costs around 6,000 euros per square meter. The annual increase in purchase prices has been around twelve percent since 2016, says Colliers.

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