20 October 2022, by Victoria Séveno

The most recent edition of the Global Real Estate Bubble Index has once again highlighted the excessively high prices on the housing market in the Dutch capital, warning that the current housing bubble in Amsterdam shows a real risk of bursting. 

UBS Global Real Estate Bubble Index 2022

Published annually by UBS, a Swiss bank and financial services company, the Global Real Estate Bubble Index determines which cities around the world have the greatest housing bubble risk by investigating international real estate trends and prices. The study analyses house prices in 25 cities using five key sub-indices: 

  • Price-to-income ratio
  • Price-to-rent ratio 
  • Change in mortgage to GDP ratio
  • Change in construction to GDP ratio
  • Relative price city-to-country indicator

These factors are then used to determine the city’s risk of a real estate bubble – when property prices rise at rapid rates to the point where they reach unsustainable levels and drop sharply. 

This year once again sees nine cities ranked in the “bubble risk” category, with Toronto overtaking Frankfurt to occupy the top spot. Other European cities found to have some of the most overpriced housing markets in the world included Zurich and Munich.

While Amsterdam didn’t rank quite as highly as some of its European neighbours, it once again managed to secure a spot in the top 10, rising from ninth place in 2021 to seventh place this year. The study notes that the city shows “an elevated risk” of a housing bubble. 

Amsterdam housing market one of the most overpriced in the world

“Overall, bubble risk has increased only marginally as well, with the city’s price growth roughly in line with the national average,” the UBS report reads, noting that while Amsterdam displayed some of the most significant increases in housing prices out of all the European cities included in the study, Dutch salaries and rent prices have also increased – although not at the same rate.

According to the report, a skilled service worker based in the Dutch capital needs to work an average of eight years in order to be able to buy a 60-square-metre flat near the city centre. The same flat would have to be rented out for 31 years in order for the owner to turn a profit.

While house prices in the Netherlands have been steadily rising for years, recent changes to the interest rates on mortgages, the inflation rate, and the cost of energy mean the Dutch housing market is finally slowing down, with prices in some parts of the country actually falling. These latest trends could suggest that the national housing bubble is about to burst – although the market in Amsterdam remains extremely competitive. 

International housing markets with the highest bubble risk

According to the latest edition of the UBS study, the following nine cities have all been categorised as at risk of a housing bubble:

  1. Toronto
  2. Frankfurt
  3. Zurich
  4. Munich
  5. Hong Kong
  6. Vancouver
  7. Amsterdam 
  8. Tel Aviv
  9. Tokyo

For more information about the report, visit the UBS website.

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