Property bubble risks grow in Munich, Amsterdam and Paris

A growing number of European cities have climbed onto a global list of bubble risk zones put together by UBS, due to low interest rates.

Munich tops the list followed by Toronto, Hong Kong and Amsterdam. Frankfurt and Paris are new additions to the bubble risk zones.

With the exception of Milan, Eurozone cities exhibited the strongest price growth of all major global cities over the last four quarters, driven by strong economic growth in the past year and low interest rates, says UBS in a report.

The UBS Global Real Estate Bubble Index takes a long term look at the housing market and is designed to track the risk of property price bubbles in global cities.

"The housing market is recovering in Madrid and Milan, but still appears to be at an earlier stage of the cycle. Overall, the effect of lower mortgage rates will be diluted by stretched affordability in most cities. The expected economic slowdown – in particular in Germany – will test current price levels," UBS says.

In the rest of Europe, London and Stockholm’s index scores have declined over the last year.

While affordability issues, political uncertainty and less favorable tax treatment are putting pressure on house prices in London, Stockholm’s property prices have suffered from stricter rules on mortgage amortization, says UBS. In Moscow, house prices have come under strong pressure after reaching bubble-risk territory in 2007.


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