Zinedine Zidane's side became the first team to successfully win the competition in its modern guise in two successive seasons, while PSG's hopes were ended by a crushing 6-5 aggregate defeat to Barcelona.
In their ongoing quest for continental domination, the Ligue 1 club signed Neymar for a world-record €222million and brought Kylian Mbappe in on an initial loan deal from Monaco, moves that prompted UEFA to launch an investigation into a potential breach of the Financial Fair Play regulations.
But Ballack, a two-time runner-up in the Champions League with Bayer Leverkusen and Chelsea, believes Madrid remain the best team on the continent.
"For me, Real Madrid are at the top of all things at the moment. The experience, the class, the recent success. It speaks for itself," said the German.
"Even PSG with all their signings are not on their level now. They have a top team and are able to win the Champions League, but other teams can succeed as well.
"On paper, Real Madrid are the main favourites in my opinion."
Ballack envisages his former club Bayern Munich being among the contenders, praising Carlo Ancelotti's optimism as he looks to improve in his second year at the Allianz Arena.
"I can understand his optimism, because he is a coach of a top team which always has the chance to win the Champions League. If that always happens is another question, but he illustrates it," said Ballack.
"I think that's the right way as a coach. He has won a lot with different teams and knows exactly how to win the Champions League with all his experience. It's the right way to attack that goal offensively and positively, especially for his players.
"It's still a team with stars, although it seems the team is getting younger. Ancelotti showed in the past, that he can work with different teams and different players.
"It's important to make his point at Bayern. After a year familiarisation, which is not always easy concerning the language, to reach everyone, to find the right words in the right moment… I think he can be more confident, because he's a confident character and convinced of himself.
"He should attack, because he has the possibility to attack with Bayern. He can reach something big, to win Champions League with three different teams."