The latest Swiss Real Estate Bubble Index, released on Monday,  inched into the "risk" zone in the third quarter, reflecting "the continued increase in imbalances on the Swiss housing market," UBS said in its index report, pointing out there had been a "sharp rise" in real estate prices compared to the previous quarter.

According to the index, Davos in eastern Switzerland had seen a real estate price increase of 7.6 percent in the third quarter, while prices were up 5.1 percent in Zug, in the centre of the country, and 3.8 percent in Lausanne and in Switzerland's financial hub, Zurich.

The situation had eased somewhat in Geneva, where prices rose only 1.8 percent, UBS said, but stressed: "this is still significant given the high price level."

The UBS index has five categories — slump, balance, boom, risk and bubble —  and the third quarter marked the first time since the early 1990s that it hit "risk", UBS said.

"Although the index only just exceeded the risk zone threshold, further price rises should increasingly be seen as overvaluation," it cautioned.

While population growth made some level of price increases reasonable, UBS lamented that "the high price level is increasingly being supported by the demand for real estate as an investment."

At the same time, "household mortgage debt is showing no signs of abatement, UBS said.

This represents a dangerous trend, as both drivers could easily be thrown into reverse and therefore trigger a price correction."

"Declining consumer prices and stagnating income (. . .) do not form a basis for sustained real estate price increases," it cautioned.

The UBS warning came after ratings agency Standard and Poor's in July lowered its outlook on nine smaller regional Swiss banks, citing the impact they might soon feel from what appeared to be a growing real-estate bubble.