Sydney is facing a 'housing bubble' after a surge in prices in the past five years, according to a UBS Group report.

The UBS Global Real Estate Bubble Index report analysed residential property prices in 18 'financial centre' cities around the world, with Vancouver, London and Stockholm topping the list and Sydney coming in fourth.

According to the report, Sydney house prices have risen 45 per cent since 2012, with rapidly growing demand from foreign investors driving prices higher.

Other drivers for the price rises for the cities most at risk are low interest rates and bullish expectations, the report said.