Which factor is a sign of a potential real estate bubble?

Rapidly escalating property prices are a clear indicator of a potential real estate bubble. This phenomenon occurs when property values increase at an unsustainable rate, often driven by speculative investment rather than genuine demand. When prices rise quickly and significantly, it suggests that buyers may be overextending themselves, assuming that prices will continue to climb indefinitely. This speculative hype can create a disconnect between property values and the underlying economic fundamentals, such as income levels and employment rates, which should ideally support sustainable price growth.

In a healthy market, property values typically grow at a stable and manageable pace, reflecting real demand and economic stability. However, when the surge in prices is rapid, it raises concerns about the sustainability of this growth and hints at potential corrections in the future, often resulting in significant market volatility.

Other factors, like stable property valuations and stagnant market activity, suggest a more balanced market condition, while a decline in new construction projects may indicate a response to an oversaturated market or economic downturn rather than the formation of a bubble.