Where is the most severe property market "bubble trouble." UBS, seeking to answer that question, has released its “Global Real Estate Bubble Index 2025” report. It shows which cities face low downside risk, where corrections are likely, and where price increases are set to pick up again.

According to this year’s edition of the UBS Global Real Estate Bubble Index, Miami faces the highest bubble risk among the cities in this study, followed by Tokyo and Zurich. Over the last four quarters, global home prices remained virtually unchanged in inflation-adjusted terms, as housing affordability weighed on demand.

UBS analysed residential property prices in 21 major cities around the world for the study which finds that an elevated risk is also evident in Los Angeles, Geneva, Amsterdam, and Dubai. The latter recorded the strongest risk increase from the prior edition together with Madrid, the firm said in a statement.  

The UBS Global Real Estate Bubble Index traces the valuation of owner-occupied housing markets and the valuation of cities in relation to their country and economic distortions, such as lending and building booms. 

Risks are moderate in Sydney, Vancouver, and Toronto. Madrid, Frankfurt and Munich also fall into the moderate-risk group. According to the index, London, Paris and Milan face low bubble risk. Outside Europe, Hong Kong, San Francisco, New York and SĂŁo Paulo are in the same category, with SĂŁo Paulo showing the lowest risk among all cities analysed, the survey shows.  

Global housing markets continued to cool on average. “Broad exuberance has faded, with average bubble risk in major cities falling for a third straight year,” Matthias Holzhey, lead author of the study at UBS Global Wealth Management’s chief investment office, said. “Cities flagged with high bubble risk in 2021, like Frankfurt, Paris, Toronto, Hong Kong or Vancouver, saw average real price drawdowns of nearly 20 per cent from their peaks as interest rates rose in subsequent years. By comparison, inflation-adjusted prices in cities with lower imbalances fell about 5 per cent on average.”  

But some cities have bucked the trend. Over the past five years, Dubai and Miami were the front runners with average real price growth of roughly 50 per cent. Tokyo and Zurich followed, with growth of 35 per cent and nearly 25 per cent. Compared with last year, Madrid recorded the strongest real price growth among all cities analysed, with a 14 per cent increase.  

Affordability squeeze raises regulation risk 
Hong Kong is the least affordable city in the study, property buyers require about 14 years of income to purchase a 60 sqm apartment (650 sqft). Prices have also decoupled from local incomes in Tokyo, Paris and London. Price-to-income ratios there exceed the factor 10. Overall, for a skilled service worker, a financially affordable living space is, on average, about 30 per cent smaller than in 2021.  

If property becomes too pricy for citizens, additional regulations are often introduced. “Tougher rules, from new taxes to outright purchase bans to rent control measures, have dimmed the appeal of once sought-after markets such as Vancouver, Sydney, Amsterdam, Paris, New York, Singapore and London,” Maciej Skoczek, author of the study at UBS Global Wealth Management, said.

The UBS Global Real Estate Bubble Index traces the valuation of owner-occupied housing markets and the valuation of cities in relation to their country and economic distortions, such as lending and building booms. Based on the valuation, the “bubble risk” is assessed: low (score below 0.5), moderate (0.5 to 1.0), elevated (1.0 to 1.5), and high (above 1.5). This classification is aligned with historical bubble episodes. However, the method cannot predict if or when a correction will happen, hence â€śbubble risk” refers to the prevalence of a risk of a large price correction.

The index score is a weighted average of the following five city sub-indices, standardised using expanding window procedure: price-to-income and price-to-rent ratios (fundamental valuation), change in mortgage-to-GDP ratio and change in construction-to-GDP ratio (economic distortion), and city-to-country price ratio. The city-to-country price ratio in Singapore, Hong Kong, and Dubai is replaced by an inflation-adjusted price index.

Regional highlights 

Miami 
Over the past 15 years, Miami has posted the strongest inflation-adjusted housing appreciation among all cities in the study of more than 5 per cent per annum. However, the boom has cooled over the last four quarters, with home price growth slowing markedly. Housing inventory has rebounded, and selling pressure has been increasing amidst rising maintenance and insurance costs. However, international demand – particularly from Latin America – remains robust, especially in the luxury oceanfront condominium segment.  

Tokyo 
Inflation-adjusted home prices are about 35 per cent higher than five years ago, while real rents and incomes have risen only in the low-to-mid single digits. Tokyo’s population growth is increasingly driven by international migration. It is also spurring more offshore demand for residential property as an investment. As Tokyo’s home prices continue to outpace the national average, affordability is eroding. Gains in female labour force participation – supporting household incomes – cannot offset the shrinking working age population. This weighs on the long-term outlook. 

Zurich 
Home purchase prices are 60 per cent higher than a decade ago, with property values rising twice as fast as rents and five times as fast as incomes. Elevated price levels in the city continue to drive demand toward more affordable suburban municipalities. Zurich has the highest price-to-rent ratio among the cities in the study, only scarcely compensating investors for long-term risks. However, a turning point in the housing market is not in sight as financing costs are low, and Zurich continues to attract a steady flow of international firms.  

Dubai 
Since mid-2023, real [estate] prices have climbed by double digits and are now 50 per cent higher than five years ago, the strongest increase among all cities in the study. As a result, housing bubble risk has surged for a second consecutive year and reached an elevated level. Incomes are not keeping pace with home prices as Dubai’s population has grown by nearly 15 per cent since 2020, with an immigration boom tightening the housing supply. Moreover, building permits suggest that new construction could reach levels last seen in 2017, and competition for offshore real estate investment with Abu Dhabi and Riyadh is intensifying.  

London 
House prices are about 20 per cent below the prior peak in 2016 and 5 per cent below the 2007 bubble high. The risk of a housing bubble has continued to decline over the last year and has fallen from a high in 2016 to low. Housing starts are at record lows, keeping upward pressure on rents. Overseas demand for London property is recovering, with a weak pound and the city’s global status continuing to draw foreign capital. Neverthless, prime buyers remain cautious as surcharges and less favourable tax treatment for nonresidents weigh on demand.  

Frankfurt 
Apartment prices have found a floor after a multi-year downturn. On an inflation-adjusted basis, prices are about 20 per cent below the mid-2022 peak. Market imbalances have eased, and bubble risk has fallen from high to moderate. Solid growth in the financial sector is supporting local housing demand. Rents have kept pace with inflation in recent years and are set to rise further in the coming quarters. Overall, Frankfurt’s housing market outlook is positive, with tight supply supporting both prices and rents.