After placing first on the UBS Global Real Estate Bubble Index last year, Toronto has fallen down the ranks in 2023 to claim its spot as the seventh-riskiest urban housing market in the world.

In this year's edition, Toronto still overtakes Los Angeles, London, Paris, New York, Dubai, and Vancouver as one of the most overvalued housing markets on Earth. 

Toronto previously placed third in 2020 and second in 2021, making it the first time in seven years that the city has been categorized as over-valued versus a bubble risk. 

"Low financing costs have been the lifeblood of global housing markets over the past decade, driving home prices to dizzying heights," the report explains. "However, the abrupt end of the low interest rate environment has shaken the house of cards." 

An overview of the UBS Global Real Estate Bubble Index for 2023. Source: UBS.

For the study, the Swiss wealth management firm analyzed residential property prices in 25 global cities. In this year's report, only two cities — Zurich and Tokyo — remained in the bubble risk category, which is down from nine cities a year ago. 

Toronto was formerly in the bubble risk zone, along with Hong Kong, Vancouver, and Amsterdam, which all saw their imbalances decline in 2023 and are now in the overvalued territory. 

In Canada, a combination of population growth, attractive financing conditions, high investment demand, and an urban supply shortage have fuelled what the report calls a "housing bonanza" in Toronto. 

Comparison of index scores between Toronto and Vancouver. Source: UBS.

Between mid-2019 and mid-2022, real estate prices in Toronto increased by 35 per cent, while increased demand for living spaces shifted the pressure to the rental market. 

According to the report, Toronto showed "signs of housing market recovery in the spring with increasing numbers of transactions and positive price growth." However, it is still "premature to speak of a turnaround against the backdrop of recent interest rate hikes from the Bank of Canada." 

Here's the top 10 list of cities that appeared on the UBS Global Real Estate Bubble Index for 2023: 

1. Zurich
2. Tokyo 
3. Miami 
4. Munich 
5. Frankfurt
6. Hong Kong 
7. Toronto
8. Geneva
9. Los Angeles 
10. London