Sydney real estate the third most overpriced in the world

By |
Sydney’s real estate is the third most overpriced in the world according to a global investment bank.

According to the Global Real Estate Bubble Index report released by UBS last week, Sydney’s real estate is behind only London and Hong Kong when it comes to being overpriced.

On the Global Real Estate Bubble Index, Sydney scored a 1.39, and while that is below the required score of 1.5 which classes a market as being at risk of a bubble, UBS does believe Sydney is faced by the possibility of a significant correction in prices.

“Real housing prices have increased almost 30% since 2012, while rents and incomes have stagnated. The prices are also influenced by strong Asian demand,” the report said.

“Gradually deteriorating economic conditions, a slowdown in China and tighter regulations increase the risk of a significant correction in the medium term.”

According to the report, Sydney, Paris and London have price to rent ratios – the number of annual rents required to purchase the equivalent property – of around 30, which puts their markets at risk if there was to be a sudden interest rate rise.

“Paris, London and Sydney… form a trio of cities with PR multiples around 30.

“House prices in these cities are vulnerable to a sharp correction should interest rates rise.”

Currently the report believes only London and Hong Kong are at risk of bubbles forming in their real estate markets, with the two scoring 1.88 and 1.69 on the Global Real Estate Bubble Index respectively.

“When inexpensive financing is combined with bullish expectations, real estate prices eventually uncouple from the real economy”, the report said.

“We have seen this in the current cycle, particularly in the world’s leading financial centres, where housing prices are now, in many cases, fundamentally unjustified.

“Bubble risk is most distinct in London and Hong Kong.”

Can you afford to buy in this suburb? Find out how much you can borrow

Top Suburbs : west rockhampton , nightcliff , campsie , toowong , chermside

go back

Get help financing your investment

Do you need help finding the right loan for your investment?

When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local expert Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus, our mortgage broking service is at no cost to you.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here