Canadian officials are working to slow a rapid rise in home prices that's being attributed to tight inventory levels in the country's largest cities and is threatening to create a housing bubble.

The benchmark price for single-family homes in Canada is up nearly 40% from 2015, according to the Canadian Real Estate Association, but in Toronto and Vancouver, the increases are even higher. And consumer debt levels are growing along with housing prices.

"In Canada, home prices continue to defy gravity, we've seen really rapid home price appreciation particularly in greater Vancouver and the Toronto area," said Joo-Yung Lee, managing director and regional head of Fitch Ratings' North America group, at the firm's Annual Global Banking Conference in New York this week.

There is not overall population growth in greater Canada, but there is an influx of new households and a growing population in Toronto. Demand has also grown as more immigrants and foreigners are buying homes.

Half of all mortgages in Canada are guaranteed by the government, and local and federal governments have stepped in to help stabilize the real estate market. Ontario has introduced its Fair Housing Plan, which plans to help homebuyers find affordable housing, increase supply, and protect buyers and renters in the city's real estate market. It includes a 16-point plan to improve home affordability.

Ontario's Fair Housing Plan would also impose a 15% tax on home sales where the purchaser is not a Canadian citizen or permanent resident, or is a foreign corporation, similar to a measure introduced in Vancouver earlier this year, Lee said. Vancouver has also introduced a vacancy tax, added rent control, discouraged flipping homes and created an oversight group to keep an eye on the local housing market.

The result? Though, still early on, Lee said in the last couple of months the number of sales has slowed, though home prices haven't been affected by that just yet.

Canada has also introduced the Lender Risk Sharing Policy, which Lee said will be significant. It would redistribute risk by requiring lenders to take on a portion of loan losses and maintain government backing on mortgages.

"They're introducing measures where there would be more skin in the game for the Canadian banks so they would have to take more direct risk on the mortgages, but they would also likely increase their capital," Lee said.

Banks would then have to raise prices to accommodate for the additional risk and capital that they're going to have to allocate.

Fitch's outlook on banks in Canada is stable, and Lee said it would take a lot of stress to make a big impact.

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