Sydney has the fourth riskiest housing market in the world following a sharp jump in prices in recent years, according to a report by investment bank UBS.
Sydney's real housing prices peaked in the second half of 2015 after jumping 45 per cent since mid-2012, the UBS Global Real Estate Bubble Index has found.
Since 2012 price falls have only been "low single-digit", UBS says.
"The Australian residential market is influenced by a rapidly growing foreign demand, in particular, Chinese, which has tripled in value over the last three years," UBS said in the report.
Rising housing supply and further tax measures to cut foreign housing investments could end the price boom rather "abruptly", UBS warned.
Vancouver, Canada, topped the bubble index, followed by London and Swedish capital Stockholm.