Toronto has topped the list of major global cities most at risk of a housing bubble with Vancouver ranking fourth, according to a new report by UBS Group AB.

It's the first time Toronto has cracked the annual rankings compiled for the UBS Global Real Estate Bubble Index, in which other "bubble risk" cities include Stockholm, Munich, Sydney, London, Hong Kong and Amsterdam.

The Swiss-based global financial services company said that the bubble risk in all of these cities has spiked over the last five years as house prices have climbed by almost 50 per cent on average since 2011.

However, "bubble risk seems greatest in Toronto, where it has increased significantly in the last year," it noted.

Notably, prices rose more than 10 per cent in the last year alone in Toronto, Munich, Amsterdam, Sydney and Hong Kong.

"Annual price-increase rates of 10 per cent correspond to a doubling of house prices every seven years, which is not sustainable," the UBS report said.

"Nevertheless, the fear of missing out on further appreciation predominates among home buyers."

The report is based on data up to the second quarter of 2017.

In Canada a large part of the negative impact of higher purchase prices on affordability has been cushioned by low mortgage rates.

An overly loose monetary policy for too long, in addition to buoyant foreign demand which governments in B.C. and Ontario have tried to cool with the introduction of a 15 per cent foreign buyers tax, have also played a role in unmooring housing markets from economic fundamentals in Canada, UBS said.

British Columbia was the first province to introduce a foreign buyer's tax in August of 2016, which resulted in a 19 per cent plunge in sales and 16.7 per cent fall in prices compared to the previous month.

Ontario followed suit in April, bringing in more than a dozen measures, including a 15 per cent tax on foreign buyers. The number of homes sold the following month fell 37.3 per cent from a year earlier and average home prices fell 13.8 per cent.

As Toronto and Vancouver's accelerating house prices have moved in rough lockstep over the last decade, neither city was dragged down by the financial crisis or weakening commodity prices due to the buffering effect of a depreciated Canadian dollar.

But UBS said a strengthening loonie and further interest rate hikes would "end the party" for Toronto.

Its report said that price growth accelerated last year in Toronto and reached an excessive 20 per cent year on year in the second quarter, whereas it peaked in Vancouver in the middle of last year when real estate prices soared 25 per cent year on year before slowing to seven per cent in the latest quarter.

The Bank of Canada raised rates twice over the summer following the economy's surprisingly powerful start to the year.

However, governor Stephen Poloz said during a speech Wednesday that he has no prearranged route for further interest-rate hikes, insisting that the central bank would be taking a more cautious approach to any future increases.