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How high interest rates created a healthier housing market

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How high interest rates created a healthier housing market

A closer look at house prices in 25 major cities around the world shows a sharp decline in prices, according to a study.

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The risk of ‘overblown’ property prices has decreased in the world’s biggest cities this past year, according to a recent study by Swiss bank UBS.

Its latest Global Real Estate Bubble Index, examining 25 of the largest cities across the world, shows that real house prices fell by 5% on average and that this trend is likely to continue. 

The price corrections cited in the report significantly lowered the risk of a real estate bubble in the cities, something that hit the globe hard during the financial crisis in 2008.

According to the report, only two cities — Zurich and Tokyo — remain in the “bubble risk” category, down from nine cities last year.

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Frankfurt, Munich and Amsterdam are the cities in Europe that have dropped to the lower-risk “overvalued” category, to join Geneva, London, Stockholm and Paris, which remain unchanged from the previous year. 

Madrid has also seen a drop in property price imbalances, according to UBS, meaning it’s now “fairly valued”, alongside Milan and Warsaw.

A real-estate or housing bubble occurs when property prices rise at a rapid and unstainable pace due to an increase in demand and limited supply. At some point, demand suddenly freezes or decreases, leading to a sharp drop in prices which bursts the bubble.

A shaking house of cards

UBS puts the general decline in housing market imbalances down to the current economic climate, which has seen a global surge in inflation and interest rates over the past two years owing to Russia’s invasion of Ukraine and the COVID-19 pandemic, among other factors.

From mid-2022 to mid-2023, real house prices in the 25 cities UBS examined fell by 5% on average, the bank said, adding that further downside in prices is likely.

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The biggest fall was seen in Frankfurt and Toronto, according to UBS, which both saw prices tumble by 15%. The two cities had the highest risk scores in last year’s edition of the UBS report.

“Low financing costs have been the lifeblood of global housing markets over the past decade, driving home prices to dizzying heights,” the authors of the report said. “However, the abrupt end of the low interest rate environment has shaken the house of cards.”

Now only Zurich, where UBS’s HQ is situated, and Tokyo are at risk of a real estate bubble, according to the report.

In the case of the former, real home prices continued to rise throughout 2023, albeit at a slower pace than in previous years, UBS said, while rental growth accelerated sharply and surpassed house price growth. 

“As the supply of available housing has climbed back to pre-pandemic levels amidst rising financing costs, we do not expect to see further price upside,” the bank added.

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Access to housing is still a problem

While the likes of Paris and London have seen price corrections and are at lower bubble risk than Zurich, the fall in prices has not been enough to significantly improve access to housing, according to UBS.

Prices remain disconnected from wages in Paris and London, the bank said, noting that the purchase of a 60 square metre home still represents 10 years’ annual salary for a qualified employee in the service sector.

Faced with this disconnect, UBS says a further fall in prices is still likely if interest rates remain at their current high levels, even if the housing shortage could then recover.

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Putin, Xi vow to ‘deepen’ alliance hours after Trump re-enters the White House

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Putin, Xi vow to ‘deepen’ alliance hours after Trump re-enters the White House

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Chinese President Xi Jinping and Russian President Vladimir Putin on Tuesday pledged to “deepen strategic coordination” in a video call less than a day after President Donald Trump re-entered the White House.

A transcript of the call posted to the Kremlin’s website showed that both Putin and Xi referred to one another as “friends” and vowed to back one another’s strategic interests, no matter the “current global situation.”

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“This year, I am ready, together with you, to elevate Chinese-Russian relations to a new level, to counter external uncertainties by preserving stability and resilience of Chinese-Russian relations,” Xi said while addressing Putin.

Russia’s President Vladimir Putin holds a video call with Chinese President Xi Jinping at the Novo-Ogaryovo state residence outside Moscow on Jan. 21, 2025. (Gavriil Grigorov/Pool/AFP via Getty Images)

TRUMP WANTS TO VISIT CHINA AGAIN AFTER HE TAKES OFFICE: REPORT

The pair both vowed to back the U.N.-centered international system ahead of the 80th anniversary this year, and to defend the post-World War II global order – a nod to Putin’s pursuit to reclaim Ukraine in what many have argued is an attempt to re-establish the Soviet Union. 

Xi also told Putin about a call he had with Trump on Friday regarding TikTok, trade and Taiwan, according to a report by Reuters.

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The Chinese and Russian leaders also reportedly “indicated a willingness to build relations with the United States on a mutually beneficial, mutually respectful basis,” Kremlin foreign policy aide Yuri Ushakov told reporters, adding this will happen “if the Trump team really shows interest in this.”

“It was also noted from our side that we are ready for dialogue with the new U.S. administration on the Ukrainian conflict,” he added.

Putin Xi

Vladimir Putin and Xi Jinping attend a reception during the BRICS summit in Kazan, Russia, Oct. 23, 2024. (Alexander Zemlianichenko/Pool via Reuters)

RUSSIA, IRAN TO SEAL PARTNERSHIP TREATY DAYS BEFORE TRUMP TAKES OFFICE

Neither readouts of the call issued by China or Russia directly mentioned Ukraine, though Russia highlighted that Beijing has remained a major supporter of Moscow’s economy as it is the largest consumer of Russian energy resources – a major earner for Putin’s war effort.

“Five years ago, we launched the Power of Siberia gas pipeline together, and today, Russia has become the leading supplier of natural gas to China,” the Kremlin said in a readout.

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Russia Victory Day

Russian President Vladimir Putin delivers a speech during a Victory Day military parade marking the 79th anniversary of the victory over Nazi Germany in World War II in Moscow. (Tian Bing/China News Service/VCG via Getty Images)

 

Though according to Beijing, Moscow did directly address China’s interests in Taiwan and, according to the readout issued by the Chinese Communist Party, “Russia firmly supports Taiwan as an integral part of China’s territory and firmly opposes any form of ‘Taiwan independence.’”

“I believe that the past year was very good for us,” Putin said. “It can be said confidently that our foreign policy ties and Russia and China’s joint efforts objectively play a major stabilizing role in international affairs.”

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With Trump in power, Europe may buy LNG, planes, and cut car tariffs

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With Trump in power, Europe may buy LNG, planes, and cut car tariffs

Bernd Lange, the president of the European Parliament’s trade committee, told Euronews how Europe could negotiate with US president Donald Trump if tariffs hit on European goods.

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Today Radio Schuman speaks with Bernd Lange, chairman of the European Parliament’s Trade Committee, who noted that Europe still has room to respond to Trump’s policies.

In his inauguration speech, Donald Trump provided little detail regarding his earlier threats to impose tariffs on the European Union. His previously stated demand that Europe face tariffs unless it increased purchases of US oil and gas was already well-known, with many European politicians asserting they are prepared to respond proportionately.

Potential measures the EU could apply include increasing LNG imports and reducing car tariffs, the MEP says. Lange also stressed that the EU’s future trade agreements could be shaped in reaction to shifts in US trade policy.

Radio Schuman also has a quick look at the European Parliament’s agenda today and at the most depressed country in Europe.

Radio Schuman is hosted and produced by Maïa de la Baume, with journalist and production assistant Eleonora Vasques, audio editing by  David Brodheim. Music by Alexandre Jas.

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Trump announces purge of over 1,000 Biden appointees

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Trump announces purge of over 1,000 Biden appointees
President Donald Trump said on Tuesday he plans to remove over 1,000 appointees from the administration of former President Joe Biden, announcing four dismissals on social media, including celebrity chef Jose Andres and former top general Mark Milley.
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