Of course we’ve noticed that the housing prices in Amsterdam are ridiculous, but UBS has confirmed it, with the Dutch capital city scoring joint third on the Global Real Estate Bubble Index 2019.

Amsterdam at risk of a bubble

A real estate bubble occurs when housing is substantially mispriced for a sustained period of time. The UBS Global Real Estate Bubble Index 2019 identifies the risk of property price bubbles in global cities; this year 24 are included. Cities are assessed and given an index score which then places them in one of the four categories: undervalued, fair-valued, overvalued and bubble risk.

This year, Amsterdam has yet again been given an index score which places it in the bubble risk category. In fact, Amsterdam now shares third place for bubble risk with Hong Kong. This is a significant jump, as Amsterdam only joined the at-risk category in 2017, then ranking 8th out of the 8 "at-risk" cities.

According to UBS’ report, “Amsterdam has recorded the strongest price increase of all the cities in the study since 2015. On average, real prices have increased by close to 10% a year, outpacing income growth by far.” The city owes these developments to its “strong regional economy and rapidly loosening financing conditions amid a wave of speculative buying.” Because of this, investors have been able to borrow more money at a lower longer-term cost, resulting in them snapping up homes and then renting them out at high prices.

The end of the house price boom

For all the cities in the Eurozone, the index scores increased. This is driven by the low interest rates. There is a little good news, though, as it seems like we’ve come to the end of the boom when it comes to house prices. For the majority of cities in the index, price growth rates have continued to slow.

In Amsterdam, price growth has slowed to five percent over the last four quarters and fallen below the national average for the first time since 2008. UBS believes a correction is very likely, should there be an economic recession.

Cities at risk of a housing bubble

The seven cities in the at risk category of this year’s UBS Global Real Estate Bubble Index are as follows:

1. Munich
2. Toronto
3. Amsterdam
3. Hong Kong
5. Frankfurt
6. Vancouver
7. Paris

For more information, please see the UBS website.