(Adds details from report, background)
OTTAWA, July 27 (Reuters) - Canada's housing market is showing strong signs of overvaluation as prices have surged, the federal housing agency said on Wednesday, becoming the latest authority to voice concern about the country's multi-year property boom.
Canadian home prices have soared in the years since the 2008 financial crisis, boosted by record-low borrowing costs.
A more recent ramp up in the Toronto and Vancouver markets has raised concerns among policymakers, prompting the creation of a government working group and a new British Columbia tax on foreign buyers. Canada Mortgage and Housing Corporation (CMHC), which advises the federal government, said on Wednesday in its third-quarter report that evidence of problematic conditions in the national market has increased to moderate from weak in its previous report.
The agency noted real prices increased by 14 percent between the first quarter of 2015 and the first quarter of this year. That compares to a 9 percent increase between the end of 2014 and the end of 2015.
"House prices across Canada remain higher than levels consistent with personal disposable income, population growth and other fundamental factors," the report said.
However, it noted price acceleration was concentrated in Toronto and Vancouver. Excluding the two major cities, annual price growth in Canada would have been just 5.9 percent as of the first quarter, CMHC said.
If price acceleration continues and expands, the level of evidence of problematic conditions will likely be raised to high in its next report, the agency said.
It continued to rate the hot markets of Vancouver and Toronto as having strong evidence of overvaluation, along with Saskatoon, Saskatchewan; Hamilton, Ontario; and Quebec City.
For Vancouver, where lofty prices have been partly blamed on overseas buyers, CMHC's overall assessment of potential problems was also bumped up to strong.
Prices for single-detached homes in Vancouver continue to be at levels higher than what the economy and demographics would suggest, while high levels of sales and minimal increases in new listings have made for tight market conditions, the report said.
British Columbia earlier this week introduced a 15 percent property transfer tax on foreign real estate buyers in Vancouver in an effort to address affordability issues in the city.