Hong Kong has the least affordable housing among global financial centres featured in a study by UBS, and is at risk of a bubble, despite prices dipping slightly since last year. The city’s residential property has the highest price-to-income among the 18 financial hubs surveyed in the annual UBS Global Real Estate Bubble Index, with a score of 18.5, well ahead of places such as London, Paris, Singapore, and New York. According to the survey’s methodology, that means a skilled service worker in Hong Kong would need to work for 18.5 years to afford a 60 square meter flat near the city centre. Even if people earning an average income — around HK$15,055 — had their salaries doubled, they would still “struggle to afford an apartment of that size,” UBS said. The report found overvaluations had become more pronounced in the majority of cities surveyed, with Vancouver now facing the greatest risk of a housing bubble, followed by London, Stockholm, Sydney and Munich. Hong Kong completed UBS’s list of places facing a “bubble risk”. At the other end of the scale, Singapore, Boston, New York and Milan were “fairly valued”, while Chicago was significantly undervalued. UBS defines a bubble as a “substantial and sustained mispricing of an asset”. The report’s authors said that Vancouver’s housing market was in “overdrive due to strong demand for local properties among foreign investors and a loose monetary policy. Currently, house prices in Vancouver seem clearly out of step with economic fundamentals, and are in bubble risk territory.” While rents in Hong Kong have fallen 8 per cent since their peak in mid-2015, the price-to-rent ratio in Hong Kong shows “still unsustainable” levels, as it would take a person on average 35 years of renting a 60 square meter flat to pay for it. “Real incomes have virtually stagnated in Hong Kong for many years,” the report said. “As a consequence, the affordability of housing is the lowest among the cities considered.” The lack of affordability and continued overheating in the market put the city at risk of seeing a housing bubble, according to the UBS report. “Hong Kong still faces bubble risks, but fewer than last year,” it said. Real incomes have virtually stagnated in Hong Kong, so the affordability of housing is the lowest among the cities considered UBS report The government has introduced cooling measures in recent years, but UBS analysts say the steps, aimed mainly at foreign investors, were not proving effective. Thomas Lam, head of valuation and consultancy at Knight Frank, said he does not see Hong Kong experiencing a bubble, but acknowledged the high level of prices in the real estate market. Lam said he expects the government to continue releasing both residential and commercial housing supply, and hopes officials will relax existing restrictions imposed by the Hong Kong Monetary Authority (HKMA) on home buyers. “The government has to work harder to [address this],” he said, pointing to the fact that around 60 to 70 per cent of property buyers in Hong Kong are motivated by investment purposes. The UBS study found that the average living space per Hongkonger stands at just 14 square meters, less than the size of an average parking space. Developers such as Henderson Land have recently launched some of the city’s smallest flats, some measuring just 161 square meters, which Lam attributes to “the affordability issue” in Hong Kong. He said Hong Kong’s housing market will continue to be influenced by the movement of interest rates, as set by the US Federal Reserve, as well as the local and mainland economies.