Investment bank UBS has listed Sydney as the third most over-priced housing market in its latest Global Real Estate Bubble Index report.

The report notes that central bank monetary easing around the world is allowing many housing markets to “decouple” from the real economy.

The index lists London in first place, with properties valued at 1.88 time their intrinsic worth. Second on the list is Hong Kong at 1.67 times over-valued. Third is Sydney, which the bank estimates to be 1.39 times over-valued.

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The report notes: “Real housing prices [in Sydney] have increased almost 30 per cent since 2012, while rents and incomes have stagnated. The prices are also influenced by strong Asian demand.

“Gradually deteriorating economic conditions, a slowdown in China and tighter regulations increase the risk of a significant correction in the medium term.”

Sydney ranks eighth on the index for price-to-income ratios, and price-to-rent ratios.

Melbourne, the other city frequently cited in Australian domestic media as being close to ‘bubble’ property valuations, was not included in the UBS list of 15 over-valued cities.