UBS is warning that rising global debt could reshape real estate markets over the next decade, even as concerns about asset bubbles remain elevated in key cities. In its latest annual report on housing markets, the bank noted that public debt is on track to approach 100% of global GDP by 2030. That increase may present policy challenges for governments, but, paradoxically, it could also provide “fresh tailwinds” for housing.
According to UBS, policymakers have only a few tools to manage such debt levels. Austerity—raising taxes and reducing spending—is increasingly unpopular amid political polarization and aging populations. Allowing inflation to rise is another option, since higher inflation reduces the real cost of fixed-rate debt while boosting tax receipts. The third tool, which UBS calls “financial repression,” involves central banks keeping borrowing costs artificially low. Both inflation and financial repression tend to make real assets such as housing more attractive, though UBS warns that they can fuel bubbles when asset prices detach from fundamental values.
The report examined 21 global cities and assessed bubble risks based on price-to-income and price-to-rent ratios. Among U.S. markets, Miami ranked as the riskiest, while Los Angeles fell into the elevated-risk category. By contrast, San Francisco and New York showed relatively low bubble risk compared with international peers.
Miami posted the strongest housing appreciation in the study, with real prices rising an average of 6.8% annually over the past decade, alongside a modest 1.2% increase in rents. Although the boom has cooled in recent quarters, UBS said owner-occupied prices remain disconnected from rental values. Prices are likely to turn negative, the report noted, but a sharp correction “seems unlikely.”
In Los Angeles, home prices have been lifted by limited supply and the strength of the luxury segment. Yet rents have not kept pace with inflation, which UBS partly attributes to “suboptimal regulatory policies” and ongoing quality-of-life issues. Weak absorption of new supply has also added to affordability pressures, leaving Los Angeles among the least accessible markets in the U.S.
San Francisco, by comparison, registered just a 0.7% real price gain over the past decade, while rental values declined 2.1% in real terms. Prices remain 10% below their 2022 peak after adjusting for inflation, though affordability challenges persist.
New York’s housing market has also cooled, with a 10-year real price change of -0.5% and a rental change of -0.8%. UBS said return-to-office mandates and job growth have increased renter demand, leading to more competition for listings. High-end properties remain in demand, but condo prices have largely “stagnated” once inflation is factored.
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