UBS has identified Miami as the housing market with the highest bubble risk among the 21 cities in its Global Real Estate Bubble Index, citing a long run-up in home values, worsening affordability and a growing disconnect between prices paid by buyers and conditions in the rental market.
The report assigned Miami a bubble-risk score of 1.73, placing it in UBS’s highest risk category, which applies to markets scoring above 1.5. UBS said Miami has recorded the strongest inflation-adjusted housing appreciation of any city in the study over the past 15 years, though that surge has slowed in recent quarters. Over the last four quarters, real home prices in Miami were still up 1.9% from a year earlier, while real rents fell 1.9%. UBS said the city’s current price-to-rent ratio has now moved beyond the extremes seen during the 2006 housing bubble.
The bank said several factors are now putting pressure on the market. Housing inventory has rebounded to near pre-pandemic levels as slightly lower mortgage rates and substantial homeowner equity have encouraged more owners to list properties. UBS also pointed to regulatory changes affecting older condominiums, which have forced many long-time owners to confront major deferred-maintenance costs. Higher insurance premiums linked to environmental risks have added to that pressure, contributing to additional listings.
Even so, UBS said a sharp correction does not appear likely at this stage. The report said Miami continues to benefit from strong demand drivers, including its coastal location, Florida’s tax environment, migration from the Northeast and West Coast, and continued international demand, particularly from Latin America and in the luxury oceanfront condominium market.
On a broader valuation measure, UBS said it takes about five years of average income for a skilled service worker to buy a 60-square-meter apartment in Miami, though it noted that higher mortgage rates can still make ownership burdensome in U.S. cities.
