UBS: Tel Aviv housing overvalued

Old North Tel Aviv / Photo: Guy Lieberman , Globes

The residential real estate market in Tel Aviv is 'out of balance,' according to the UBS Global Real Estate Bubble Index 2020.

Residential real estate prices in Tel Aviv are overvalued according to the UBS Global Real Estate Bubble Index 2020, which was published today. The index has a traffic light system with Tel Aviv defined as a 'yellow' city - in other words housing prices are not in a 'red' bubble situation but they are overpriced, or as UBS describes it "out of balance."

The UBS Global Real Estate Bubble Index 2020 is compiled annually by the Swiss bank's Global Wealth Management's Chief Investment Office to indicate bubble risk or a significant overvaluation of housing markets.

Out of the 25 major cities worldwide selected, UBS ranks Tel Aviv 15th with an index score of 0.91. Munich, Frankfurt and Toronto are according to UBS the world's three most overvalued cities with scores of 2.35, 2.25 and 1.96 respectively while Chicago in 25th is the world's only undervalued city with an index score of -0.66.

In 2016, Tel Aviv was defined as a 'red' city in a bubble situation but since then the situation has improved.

Caroline Kuhnert, Head of Central and Eastern Europe, Greece and Israel at UBS Global Wealth Management said, "Over the last 30 years, Tel Aviv has seen some of highest price growth among the cities covered in this report. Despite short-term uncertainty, easy financing conditions and scarce housing supply should keep house prices on the rise. While this means that affordability is stretched, it is also a sign of Tel Aviv’s growing economy."

Overall UBS has not yet seen housing price falls because of the Covid-19 pandemic. "Despite the pandemic, housing markets have remained resilient in the first half of 2020. The study discerns three main reasons for this outcome. First, home prices are a backward-looking economic indicator and are only able to reflect an economic downturn with a certain delay. Second, the majority of potential home buyers did not suffer direct income losses in the first half of 2020. Credit facilities for companies and short-time work schemes mitigated the fallout from the crisis. Third, governments supported homeowners in many cities during the lockdown periods. Housing subsidies were increased, taxes lowered, and foreclosure procedures suspended."

Published by Globes, Israel business news - en.globes.co.il - on September 30, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Old North Tel Aviv / Photo: Guy Lieberman , Globes
Old North Tel Aviv / Photo: Guy Lieberman , Globes
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