The risk of overvaluation in Canada's housing market remains modest overall, the country's national housing agency said Thursday, but it warned that strong price increases have led to heightened concerns over the large Toronto market.

Canada Mortgage and Housing Corp., which released the findings in its quarterly House Price Analysis and Assessment Framework, also found a higher risk of problematic conditions in the cities of Winnipeg, Manitoba and Regina, Saskatchewan.

Home prices in Canada have climbed steadily, driven by rock-bottom interest rates. The Canadian Real Estate Association said earlier this month that the national average price for resale homes rose 9.6% in June from a year earlier. Earlier Thursday, Statistics Canada reported a stronger-than-expected 0.3% rise in prices for new homes in the same month.

"The overall assessment of risk detected by the framework is high for Toronto, Winnipeg and Regina. In Toronto, the high overall risk reflects a combination of price acceleration and overvaluation," CMHC said. The agency added that overvaluation and overbuilding are concerns for Winnipeg, while risks in Regina reflect higher prices, overvaluation and overbuilding, mainly in the condominium sector.

CMHC's latest findings come amid concerns over the health of the Canadian economy amid a continuing slump in crude oil prices. The Canadian economy shrank in the first quarter and has contracted in each of the first two months of the second quarter. The Bank of Canada is also forecasting a contraction of 0.5% for the second quarter. Last month, the central bank cut its overnight interest rate by 25 basis points to 0.50%, citing in part a deeper-than-expected fallout from lower oil prices.

In Toronto, "the rise in house prices have not been matched by growth in personal disposable income," said CMHC chief economist Bob Dugan in a release.

For Vancouver, CMHC characterized the overall housing-market risk as "low" in the Western Canadian city.

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