Real Estate Market in 2025: A Look Back at UBS Predictions

Real Estate Market in 2025: A Look Back at UBS Predictions. In its 2020 edition of the Global Real Estate Bubble Index, the Union of Swiss Banks (UBS) highlighted the increased risks of a real estate “bubble” in more than half of the twenty-five cities studied. I wanted to see what the situation is, 5 years later, for the top 5 cities in the ranking: Munich, Hamburg, Toronto, Hong Kong and Paris. Agence Etoile tells you more.

What is a bubble in real estate?

The typical case of a real estate bubble was the 1990s with the collapse of real estate prices in Paris. Economic players speculated, and a lot at the time, with the transfer of promises of sale. In August 1990, the Gulf War brought an abrupt halt to an 85% increase in prices recorded from 1985 to 1989. This was followed by a 40% drop in prices between 1991 and 1996.
For UBS, the bubble consists of an overvaluation of real estate prices in a climate of economic uncertainty. In 2020, the crisis that occurred due to the very rapid increase in interest rates in 2022 was not predictable. According to UBS, the bursting of the bubble would have been due to a flight of city dwellers to greener and more affordable areas.
So what is the situation at the beginning of 2025? Has the bubble burst?

Munich: A Resilient Market

Munich is the 3rd largest city in Germany, with 1.6 million inhabitants within its walls, after Berlin and Hamburg, with a GDP per capita of 53,073 euros.

In 2020, the average price of an apartment in Munich was €10,495/m², and in 2024, it will be €11,420/m², recording a stable increase of 2% per year. The Munich real estate market is extremely competitive, with demand regularly exceeding supply.

The bank lending rate in Germany has remained stable at 3.63% since 2003. This framework encourages many foreign investors to turn to Munich, attracted by the strength of the real estate market and its growth potential.

Frankfurt: The Great Financial Center

Frankfurt, 800,000 inhabitants, 5th city in Germany, 4th financial center in Europe, the richest city in Germany with a GDP of €85,000/inhabitant.

Frankfurt, the second city at risk in 2020, shows that its real estate prices continue to grow in a framework that remains dominated by local buyers. The average cost of an apartment has jumped to €7,600 in 2024, with an increase rate of more than 6% per year.

The arrival of more than 25 banks after Brexit has strengthened the attractiveness of the city. The real estate market is responding favorably to the growing demand for buyers, particularly among young international professionals.

En 2020, l’UBS Global Real Estate Bubble Index pointait Paris, Munich, Francfort, Toronto et Hong Kong. Cinq ans plus tard, la bulle a-t-elle éclaté ? André Perrissel, président du World Property Association répond au micro Mon Podcast Immo d’Ariane Artinian.
https://www.mysweetimmo.com/2025/03/02/immobilier-une-bulle-qui-menace-ou-une-crise-des-taux-andre-perissel/

Toronto: A Market in Transition

Toronto is the largest city in Canada and the 4th most populous city in North America with 3 million inhabitants. The GDP per capita is €48,500. Toronto is the third largest technology park in North America, after Silicon Valley and New York, with the fastest growth.In Toronto, the real estate market has shown moderate growth since 2023, with a slight decline in average prices. In December 2024, the average price of a condo reached $647,200, representing a decrease of 3.7% compared to the previous year, marking a significant drop of 7.54% since 2020.

The rise in Canadian interest rates, from 2.45% in August 2020 to 7.2% in January 2024, has led to affordability challenges for buyers, keeping sales below historical norms.

Hong Kong: Towards a recovery?

The city has 7 million inhabitants. It is one of the two largest financial centers in Asia along with Singapore. The GDP per capita is €54,900. In 2021-2022, in a context of restrictions due to the Covid-19 pandemic and Chinese political repression following the 2019-2020 protests, strong emigration caused the population to fall by 1.6%

Hong Kong, known for its high real estate prices. In luxury real estate, prices are even soaring to an average of 33,000 euros per m². The frenzy is such that the square meter can climb well above that and reach 150,000 euros in some buildings. In 2024, the average purchase price per square meter is €13,707. A drop of almost 30% since its peak in 2019. However, analysts predict a recovery with a possible increase of 10% in 2025, supported by rate cuts and government policies aimed at stimulating the market. Paris: A Changing City
GDP €57,600 per capita

Paris is sleeping

The French capital is suffering from the conjunction of three negative factors: the rise in interest rates, the flight of families and the legislation on energy standards that prohibit the increase in rents for class f housing or the ban on renting for class G housing.

This most expensive city in France, has seen a total decline of 11% since 2020, with an average price below €10,000 (at €9,768). The number of sales has collapsed, from 31,000 in 2020 to 25,160 in 2024, a sign of a shrinking market.

The lack of affordable housing and the desire for a better quality of life are pushing many families to leave the capital. This trend is observable in many large cities.

French legislation on energy standards prohibits in 2025 the increase in rents for housing of energy class F or the prohibition of renting for housing of class G. In Paris, 400,000 homes are concerned. The work to bring them up to standard is heavy for owners. Despite aid from the State and the City of Paris, the project sometimes approaches 50,000 euros. Many owners prefer to keep their homes empty, rather than sell them at a low price, either because the work is expensive, or because the work to improve the energy class is impossible. For example, in Haussmannian buildings, it is impossible to insulate the facades from the outside. Only 13,000 homes in Paris were able to earn an E label after work.

In conclusion, bubble or not bubble?

What can we learn from the real estate bubble predicted by UBS in 2020? Munich and Frankfurt stand out with resilient prices and strong attractiveness. On the other hand, Toronto and Hong Kong are feeling the effects of rising rates, while Paris, despite falling prices, still seems to be resisting these upheavals. A complex dynamic to follow in the coming months as the market continues to evolve.

The trends observed in these major cities offer a glimpse into the evolution of global real estate markets, reflecting the interactions between local economy, demographic pressure and political decisions. It remains to be seen how these dynamics will play out in the years to come.

André Perrissel