A report released on Wednesday by the Swiss banking and investment firm UBS found that Tel Aviv housing prices exceed the actual value of the properties.
The report issued by the company's Global Wealth Management department analyzed 25 cities around the world and divided them into color groups. The red group included localities that are risky for investors as they are likely to become real-estate bubbles, the yellow group includes cities that have seen prices rise beyond the actual value of the properties, and the green group consists of cities where prices are low and pose no risk for investors.
The most popular real-estate investment opportunities that are defined by the report as risky for investors and marked in the red group, include opportunities in Munich and Frankfurt, followed closely by Paris, Amsterdam and Zurich.
Caroline Kuhnert. Head GWM Central & Eastern Europe, Greece and Israel at UBS said that Tel Aviv - which is currently located in the yellow group - saw its housing prices rise more than most cities reviewed in the report despite the uncertainty in the region.
According to Kuhnert, financing terms and a limited amount of available property contributed to the increase which was an indication of the financial boom the city has experienced.
Chief Investment Officer at UBS Global Wealth Management Mark Haefele warned that the current coronavirus crisis, the consequent rise in unemployment, and the decrease in income, could impact housing costs in the short term.
Rent prices have already declined in most cities mentioned in the report and may be further impacted after government assistance attached to the coronavirus pandemic runs out.
Managing Director and Head CIO Swiss & Global Real Estate and Swiss Regional Analysis at UBS Global Wealth Management Claudio Saputelli said that since more people have been working from home, it mitigates the need to live in urban centers and opens up opportunities for less expensive housing in suburban and rural areas.
Matthias Holzhey, an economist who authored the report, said cities that pose a higher risk for investors due to their overpriced real estate, fare better during the coronavirus crisis and despite a short term drop that is expected in housing costs – would likely see prices increase again in the medium term.