UBS: Tel Aviv housing highly overvalued

Tel Aviv  / Photo: Shutterstock

The Swiss investment bank says that falling mortgage rates, rapid population growth and lack of supply are pushing up prices.

The UBS Global Real Estate Bubble Index 2021, a yearly study by UBS Global Wealth Management's Chief Investment Office, indicates that the bubble risk has on average increased during the last year, as has the potential of a severe price correction in many of the cities tracked by the index including Tel Aviv, where it says housing market imbalances are high.

Noting that housing prices fell by almost 10% in Tel Aviv between 2017 and 2019, UBS says, "In Tel Aviv, falling mortgage rates and rapid population growth have pushed up prices. Moreover, the government has lowered the purchase tax for second homes, even encouraging housing market speculation as the market again approaches bubble risk territory. As a result, the market is highly overvalued."

UBS observes that demand was especially high in the first half of 2021 and housing prices are again on the rise. "With a situation of a shortfall in a supply, price rises have been the logical result. Prices today are 6% higher than a year ago and they are at their highest ever levels," UBS writes.

UBS cites the large growth in Israel's population, and the fall in building starts as not boding well for any relief in continued price rises. UBS also mentions the Bank of Israel's recent tightening of mortgage regulations so as to not allow homeowners to buy additional homes with their first homes as collateral. UBS stresses, "That won't stop the boom."

Published by Globes, Israel business news - en.globes.co.il - on October 13, 2021

Copyright of Globes Publisher Itonut (1983) Ltd. 2021

Tel Aviv  / Photo: Shutterstock
Tel Aviv / Photo: Shutterstock
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