Frankfurt and Munich have long been considered vulnerable to a real estate bubble. According to a UBS study, the picture has now changed. There are several reasons for this.
Skyline in Frankfurt: A new real estate boom is probably not expected for the time being. Photo: Boris Roessler/dpa
Frankfurt. Rising construction costs and higher interest rates have significantly cooled down Germany's two hottest real estate markets. According to the major Swiss bank UBS, Frankfurt and Munich will still be among the cities with the greatest risk of a real estate bubble in the world in 2022. Both cities now only rank in the midfield.
This emerges from a study published by UBS on Tuesday, in which the bank examines the risk of a real estate bubble in 23 major cities around the world. Accordingly, Frankfurt comes in twelfth place, Munich in 15th place.
The risk of a real estate bubble in Frankfurt and Munich is moderate despite high housing prices. Frankfurt has seen a significant decline in the risk of a real estate bubble, “driven by a decline in real estate prices,” writes UBS. The bubble risk is also moderate in Munich, as high interest and construction costs are slowing down the housing market.
Since 2022, purchase prices have fallen significantly, adjusted for inflation, due to increased loan interest rates, while consumer prices rose sharply and incomes also increased.
For its “Global Real Estate Bubble Index”, UBS compares purchase prices and rents with the development of incomes and the economy and sees whether there are any noticeable deviations.
Household debt and construction developments are also taken into account. Exaggerations have often been an alarm signal here, for example in the USA, where a real estate bubble burst in 2007/2008 and triggered the global financial crisis.
However, UBS expects at most smaller local bubbles, for example in individual cities, in the near future. However, there are no major national crises in sight on the real estate market.
Munich skyline: Real estate prices in the Bavarian capital almost a quarter below the record from 2022. Photo: Peter Kneffel/dpa
Overall, the bubble risk has changed little worldwide, according to UBS. In three metropolises in particular, there is a great risk that price developments will become decoupled from actual property values: Zurich, Tokyo and Miami.
UBS currently sees the lowest risk of a real estate bubble in São Paulo, San Francisco and New York. Paris and London are also low in the index, which was calculated for the twelfth time in 2026.
Purchase prices under pressure, but rents are rising
The real estate markets in Frankfurt and Munich have corrected significantly after a long boom in low interest rates, says Maximilian Kunkel, UBS chief investment strategist in Germany. “Adjusted for inflation, prices are up to 25 percent below the highs of 2021 and 2022.”
In Frankfurt, real estate prices will have fallen by three percent in 2025. However, there is still significantly more demand than supply there, according to UBS: “Immigration and the trend towards smaller households are driving up rents, while high construction and financing costs are slowing down new construction activity.” In Munich, real estate prices, adjusted for inflation, would be almost a quarter below the record set in 2022. Rising loan interest rates would have prevented price increases.
“The German residential real estate market has reduced a significant part of the overvaluation from the low interest rate phase,” says UBS manager Sükriya Aclan. The scarce housing supply in Frankfurt and Munich results in solid prospects for long-term buyers. However, a new real estate boom is not to be expected due to the increased interest rates.
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Anyone considering buying a property for their own use should do the math carefully. In most metropolises, a newly purchased 60 square meter apartment now costs more than 40 percent of the gross income of a highly qualified specialist. According to UBS, in many places renting is cheaper than buying. Munich in particular stands out for the Swiss financial institution.
UBS also dispels a myth: “Home ownership has been offered in more than half of the cities examined in the past five years
"There is no effective protection against inflation," writes the bank. In markets where there was a very high risk of a price bubble in 2021, real estate prices have fallen particularly sharply since then, adjusted for prices, by an average of around 15 percent.
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First publication: September 22, 2026, 3:28 p.m.
dpa, Florian Spohr Published according to the editorial standards of the Handelsblatt. You can find more information in our guidelines.
