Hong Kong’s housing prices are not linked to the economy and are at “significant risk of entering a downward cycle should the international attractiveness of the city come into question”, the firm said in its October report, which featured the UBS Global Real Estate Bubble Index.
“Weaker economic growth in China, a worsening job market and the risk of rising interest rates are overshadowing the outlook.”
UBS WM expects a 10% decline in Hong Kong residential prices by the end of 2016.
London has the highest bubble risk in residential property of all cities on the index. House prices have also decoupled from household earnings, due to foreign demand for London property, the report said.
“Price-to-income and price-to-rent ratios have reached all-time highs. Only Hong Kong exhibits worse affordability levels.”