Miami has been identified as the global city most at risk of a real estate bubble for the second consecutive year, according to the 2025 Global Real Estate Bubble Index released by UBS. The report analyzes housing markets in 21 major cities worldwide, placing Miami ahead of other high-risk locations such as Tokyo and Zurich.
Key Takeaways
- Miami earned the highest bubble risk score of 1.73, making it the most overvalued housing market in the global study.
- Los Angeles is categorized as having 'elevated risk' with a score of 1.11, primarily due to severe affordability issues.
- In contrast, New York and San Francisco are considered 'low risk' markets, with scores of 0.26 and 0.28, respectively.
- Despite the high risk, UBS suggests a sharp price correction in Miami is unlikely due to strong in-migration and a favorable tax climate.
Miami's Overheated Housing Market
For the second year in a row, Miami's real estate market has been flagged for having the most significant bubble risk globally. The city's score of 1.73, though a slight decrease from the previous year, keeps it firmly in the top position. The UBS analysis points to several key indicators driving this assessment.
The report highlights imbalances in Miami's market, including high price-to-income and price-to-rent ratios. Furthermore, local property prices have significantly outpaced the national average. Over the past several years, Miami has recorded the strongest inflation-adjusted housing price appreciation among all cities included in the study.
What is a Real Estate Bubble?
A real estate bubble occurs when property prices rise to unsustainable levels, driven by demand, speculation, and exuberant spending. The UBS index measures this risk using scores: scores above 1.5 indicate a bubble risk, while scores between 0.5 and 1.5 suggest an overvalued market. Scores below 0.5 are considered fair-valued or undervalued.
Despite the high risk, the report suggests that a sudden market collapse is not imminent. The city's coastal appeal and advantageous tax policies continue to draw new residents, particularly from the US West Coast and Northeast. This sustained demand provides a floor for property values.
According to the report, "Miami's coastal appeal and favorable tax environment continue to attract newcomers... with real estate prices still well below those in New York and Los Angeles."
"Miami is where ultra-high-net-worth individuals want to live," Eddie Blanco, chairman of the board for the MIAMI Association of Realtors, has previously stated. "Miami real estate offers more bang for your millions, a business-friendly government, no state income tax, [and a] FinTech hub."
Divergent Trends in Other Major US Cities
While Miami leads in bubble risk, other major metropolitan areas in the United States show varied market conditions. Los Angeles faces significant challenges, while New York and San Francisco appear more stable.
Los Angeles Marked by Elevated Risk
Los Angeles was placed in the 'elevated risk' category with a score of 1.11, ranking it fourth globally. The city's primary challenge is affordability, which UBS describes as among the worst in the United States. This has contributed to a notable trend of population decline as residents seek more affordable living conditions elsewhere.
Los Angeles by the Numbers
- Global Rank: 4th for bubble risk
- Risk Score: 1.11 (Elevated Risk)
- Key Issue: Extreme unaffordability leading to population loss.
The high price-to-rent ratio in Los Angeles makes homeownership unattainable for a large portion of the population. The UBS report suggests that without a significant drop in mortgage rates, home prices in the city are likely to trend downward to correct the imbalance.
New York and San Francisco Deemed Low Risk
On the other end of the spectrum, both New York and San Francisco were categorized as 'low risk' markets. San Francisco received a score of 0.28, while New York scored 0.26. Despite these low scores, both cities continue to grapple with their own unique market dynamics.
In San Francisco, affordability remains a significant hurdle. However, the report notes that income growth has managed to outpace the rise in home prices over the last seven years. A key factor influencing its market is the resurgence of the rental sector.
"Return-to-office mandates and strong AI hiring draw higher-income tenants back to the city," UBS stated, explaining that this trend is accelerating rental growth and could eventually increase demand for owner-occupied homes.
New York's market is benefiting from a strong stock market, which has bolstered its luxury segment. Similar to San Francisco, return-to-office policies have increased demand for rental properties, leading to higher competition for limited inventory. According to UBS, "steady job growth, especially in higher-income segments, have been pulling more renters into the city."
Global Context and Outlook
The UBS report provides a snapshot of major housing markets at a time of global economic uncertainty. While some cities like Miami show signs of significant overvaluation, others are beginning to stabilize after periods of rapid price growth.
Factors such as migration patterns, local economic strength, and interest rate policies play a crucial role in shaping each city's real estate landscape. The differing risk levels across major US cities highlight that real estate remains a highly localized market, influenced by a unique combination of regional economic and social trends.
