London is at risk of another housing bubble as house prices have risen by 50% since 2013, according to a UBS study.
With low interest rates, rigid supply and sustained demand from China, house price growth in London is out of proportion with local economic growth, the UBS Global Real Estate Bubble Index showed.
Property prices in the capital are now 15% higher than they were at their 2007 peak, while real incomes are 10% lower.
Markets have become fragile and “out of touch with fundamentals” according to the UBS study, which analysed property prices in 18 cities. It warned that an increase in supply, higher interest rates or shifts in the international flow of capital could trigger a major downturn.
Of the 18 cities UBS analysed, six were at risk of a bubble, with Vancouver and London showing the most vulnerability.
Claudio Saputelli, head of global real estate in UBS Wealth Management’s chief investment office, said: “What these cities have in common is excessively low interest rates, which are not consistent with the robust performance of the real economy. When combined with rigid supply and sustained demand from China, this has produced an ideal setting for excesses in house prices.”
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