Frankfurt and Munich housing bubbles unlikely to burst, study says

Frankfurt and Munich housing bubbles unlikely to burst, study says

The housing market in Frankfurt and Munich is still fraught and overvalued, but an analysis published in the 2023 Real Estate Bubble Index by UBS has suggested that the market bubble in the two German cities is no longer on the verge of bursting.

Frankfurt and Munich housing markets are overvalued but cooling

In recent years, “Solid economic and employment growth, falling mortgage rates, strong investment demand, and supply shortages supported higher prices,” for housing in Frankfurt and Munich, according to the most recent UBS Real Estate Bubble Index. However, after doubling between 2012 and 2022, inflation-adjusted house prices in the two German cities have now peaked, according to the Swiss bank.

The annually published index looks at residential property prices in 25 major international cities and establishes where there may be a housing bubble. UBS defines a bubble as the “substantial and sustained mispricing” of housing.

Though the existence of a bubble cannot be proven unless it bursts, according to UBS, historical data suggests that “a decoupling of prices from local incomes and rents, and imbalances in the real economy, such as excessive lending and construction activity” are typical signs that a bubble is at play.

Seven international cities that were in the “bubble risk” zone in the 2022 Index are now in the “overvalued” category. This includes Frankfurt and Munich - the only two German cities which currently make it into the analysis - Toronto, Hong Kong, Vancouver, Amsterdam and Tel Aviv. In 2023, the housing markets in Zurich and Tokyo are the only bubbles still at risk of bursting.

Inflation triggered correction of housing prices in Frankfurt

According to the study, “Rate hikes and high inflation triggered a revaluation” which moved housing in Frankfurt out of the “bubble risk” category and into the “overvalued” category. “Peaking in early 2022, real prices in Frankfurt have corrected by almost 20 percent since then, and by 15 percent in Munich. Both cities have left the bubble risk zone, but remain highly overvalued.” When it comes to predictions for the future, UBS suggested that the “price correction is unlikely to be over”. 

For renters, amid the fact that rents have risen by 40 percent in Frankfurt over the past 10 years, coupled with “the sharp slowdown in residential construction activity and the rising population”, UBS predicted the continuation of “an exacerbated housing shortage as well as accelerated rent increases in the future”.

Where in the world is housing most overpriced?

According to the latest UBS index, these cities have the most overvalued housing markets in the world: 

  1. Zurich (bubble risk) 
  2. Tokyo (bubble risk) 
  3. Miami
  4. Munich
  5. Frankfurt
  6. Hong Kong
  7. Toronto
  8. Geneva
  9. Los Angeles
  10. London

You can read the full report on the UBS website.

Thumb image credit: PhotoLondonUK /

Olivia Logan


Olivia Logan

Editor for Germany at IamExpat Media. Olivia first came to Germany in 2013 to work as an Au Pair. Since studying English Literature and German in Scotland, Freiburg and Berlin...

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