Toronto is more at risk of inflating a housing bubble than any other city in the world, according to a new study from UBS.

Canada’s largest metropolis – making its first appearance in the UBS rankings - unseated Vancouver to top the Swiss bank’s 2017 Global Real Estate Bubble Index.

“House prices [in Toronto] are making up ground that had been lost to Vancouver,” the bank wrote. “Price growth accelerated last year and reached an excessive 20 per cent year-on-year in the last quarter. Real prices have doubled in 13 years, while real rents have increased by only 5 per cent and real income by less than 10 per cent.”

The report focused primarily on the global financial hubs of London (ranked sixth), Hong Kong (seventh), Zurich (12th), Singapore (17th), and New York (18th). Toronto was placed in a smaller section titled ‘Select Cities,’ despite entering the index at the top spot.

UBS’ smaller write-up on Toronto does not delve deeper into the factors behind the housing market’s sharp rise, nor does it specifically address the roughly 20 per cent decline in average prices from the peak in April. However, it warns, “a strengthening Canadian dollar and further interest rate hikes would end the party.”

Vancouver dropped from the top spot to fourth overall in the annual index. The report does not examine the most recent numbers that suggest the market there is heating up once more, nor does it address the provincial laws enacted to address rising prices.

“In Vancouver, price growth peaked in the middle of 2016 when real prices soared 25 per cent  year-on-year. In the second quarter of 2017, the growth slowed to [seven] per cent, falling below the country average. Income and rental growth were solid at [three] per cent and [five] per cent year-on-year respectively. As a consequence, valuations were slightly dampened in recent quarters, but the market remains in the bubble-risk zone, harbouring substantial downside and elevated correction risk,” the report said.

The index attributes the global trend of rising real estate prices in major cities to low mortgage rates, which it says “whitewash” market imbalances.

“Falling mortgage rates over the last decade have made buying a home vastly more attractive, which increased average willingness to pay for home ownership,” according to the report, which added a part of the negative impact of higher prices on affordability in Canada was mitigated by low mortgage rates.