Miami Tops Global Bubble Risk as Canadian Cities Deflate

UBS Report Reveals Dramatic Shift in Housing Market Risks, with Toronto and Vancouver Dropping to Moderate Risk After Years of Price Corrections

Miami has claimed the unwanted distinction of having the world's highest real estate bubble risk, according to UBS's 2025 Global Real Estate Bubble Index, while Canadian cities Toronto and Vancouver have seen their bubble risk ratings downgraded to "moderate" following significant price corrections over the past three years.

The comprehensive report, released by UBS Switzerland AG's Chief Investment Office, analyzed 21 major cities worldwide and found that global housing markets continued to cool over the last four quarters, with inflation-adjusted home prices remaining virtually unchanged on average.

Canadian Markets: From High Risk to Moderate as Bubbles Deflate

Toronto and Vancouver, which previously registered elevated bubble risk in past editions, have both dropped to moderate risk territory. This development reflects the substantial price correction that has already occurred in Canada, rather than improved fundamentals.

Toronto is Still Feeling Pain

Toronto's dramatic correction has been particularly striking. Home prices have plummeted by over 25% from their 2022 peak. The city's bubble risk score stands at 0.80, firmly in the moderate category.

"A multi-year housing boom ended in 2022 as a foreign-buyer ban, vacant home tax, tighter short-term rental rules, and higher borrowing costs took hold," the report states. Population growth continues to drive rental demand, but first-time buyer affordability remains "severely strained."

Vancouver’s More Moderate Correction

Vancouver's correction has been less severe, with home prices falling more than 8% from the 2022 peak. The city's bubble risk score of 0.76 places it alongside Toronto in the moderate risk category.

The report notes that active listings in Vancouver hit a 10-year high in mid-2025, adding near-term pressure on prices. High mortgage rates, strict stress tests, and regulatory headwinds, including a foreign-buyer ban, speculation tax, and vacancy tax, continue to weigh on the market.

"The reality is that the bubbles in these Canadian cities have already largely deflated," explained Matthias Holzhey, Senior Real Estate Economist at UBS and co-author of the report. "They've experienced three years of weak market conditions, which is why their bubble risk has declined. There's less risk of a bubble bursting when significant corrections have already occurred."

New High-Risk Hotspots Emerge Globally

While Canadian cities have cooled, several international markets have seen bubble risks surge to concerning levels:

Miami

Miami leads the global rankings with a bubble risk score of 1.73 – well into "high risk" territory (defined as above 1.5). Over the past 15 years, Miami has posted the strongest inflation-adjusted housing appreciation among all cities studied. However, the current price-to-rent ratio has surpassed even the extremes of the 2006 U.S. property bubble.

Housing inventory has rebounded to near pre-pandemic levels, and regulatory changes forcing older condo owners to address decades of deferred maintenance have added to selling pressure. Despite this, Miami's coastal appeal and favourable tax environment continue attracting newcomers, particularly from Latin America.

Tokyo

Tokyo ranks second with a score of 1.59, maintaining high bubble risk despite some moderation. Inflation-adjusted home prices are approximately 35% higher than five years ago, while real rents and incomes have risen only by low-to-mid single digits. The weak yen and comparatively attractive yields have spurred offshore demand for residential property as an investment.

Zurich

Zurich completes the top three with a score of 1.55. The Swiss National Bank's return to zero interest rates in early 2025 has reignited demand for homeownership, particularly in suburban areas. Home prices are now 60% higher than a decade ago, with Zurich exhibiting the highest price-to-rent ratio among all cities in the study.

Dubai

Dubai recorded the strongest bubble risk increase from the prior edition, surging to an elevated risk score of 1.09 – up from last year's moderate reading. After rising 11% over the last four quarters, inflation-adjusted home prices have returned to their 2014 peak. Dubai's population has grown by nearly 15% since 2020, tightening supply and pushing rents higher.

Madrid

Madrid also saw a significant risk increase and showed the strongest real annual price growth among all analyzed cities at 14%. The Spanish capital recorded an 8.5% increase in inflation-adjusted rents over the past year, with price growth accelerating to 13.6%, the highest in the study.

Affordability Crisis Persists Despite Corrections

The report reveals a stark affordability crisis across most global cities. In Hong Kong, a skilled service worker would need approximately 14 years of average income to purchase a 60-square-meter apartment near the city center. Paris, London, and Tokyo all show price-to-income ratios exceeding 10 years.

Canadian cities reflect this affordability strain. Despite Toronto's 25%+ price correction, homeownership remains out of reach for many residents. In Vancouver, high mortgage rates and strict stress tests are keeping would-be buyers in the rental market, even as prices have fallen significantly.

Inflation and Interest Rates Hold the Key

Looking ahead, UBS analysts suggest that the outlook for housing as an investment appears "solid" from a macroeconomic perspective, with central banks expected to lower policy rates by 2026, gradually reducing real financing costs.

However, the report warns that this scenario depends on inflation staying contained and growth remaining resilient across major economies, "both of which remain uncertain."

Canadian Markets to Remain Soft

For Canadian markets specifically, the report indicates that Toronto is likely to see flat to slightly negative price growth in the coming quarters, as "elevated and rising listings, muted sales, and softer job security amid US trade tensions are expected to weigh on prices."

In Vancouver, the combination of near-record low affordability, tighter rent caps, and a new home-flipping tax has further discouraged investor activity, suggesting continued price pressure in the near term.

Cities with Low Bubble Risk

At the opposite end of the spectrum, São Paulo showed the lowest bubble risk among all cities analyzed with a score of -0.10, followed by Milan (0.01), Paris (0.25), New York (0.26), and San Francisco (0.28). London also registered low risk at 0.34.

These markets have seen prices lag changes in rents, incomes, and national values in recent years, with affordability challenges pushing households toward cheaper alternatives.

The UBS Global Real Estate Bubble Index has been published annually since 2015 and gauges the risk of property bubbles based on historical patterns, including price decoupling from local incomes and rents, excessive lending, and construction activity. The index does not predict whether or when a correction will occur, but rather assesses the prevalence of conditions associated with past housing crises.