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A realtor's sign is placed on the front yard of a home for sale on Barton Ave. in Toronto.

Fred Lum/The Globe and Mail

Surging house prices in the Toronto area are "not sustainable and not healthy," a key executive at Bank of Nova Scotia says – but governments should wait out the busy spring buying season before stepping in.

James O'Sullivan, the head of Canadian banking at Scotiabank, said Toronto is clearly the housing market "we should collectively be most concerned about," and that the country's third-largest lender would prefer to see "action sooner rather than later."

He stopped short of prescribing any specific fix for rising house prices that risk putting home ownership out of reach for many Canadians. But he said that if the spring season of April, May and June – when the greatest volume of homes change hands – fails to show concrete signs of a cooling market, Scotiabank supports government intervention.

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Strong domestic demand and a dearth of supply, compounded by speculation from both domestic and foreign buyers, have sent house prices in Canada's largest cities soaring of late.

Politicians have been imposing measures to rein in parts of the market. In August, British Columbia imposed a 15-per-cent tax on property purchases by foreign buyers in the Vancouver region. And the federal government has made a series of changes to mortgage insurance rules, including raising minimum down payments for more expensive properties and introducing a more rigorous income "stress test" for home buyers.The Canada Mortgage and Housing Corp. (CMHC) also issued its first "red alert" for Canada's housing market last October.

But a growing chorus of top bankers are calling for something to be done to curb price increases in Canada's most populous city.

"This market has been going straight up for a very long time. So it's going to come to an end at some point, and it's a question of how it ends," Mr. O'Sullivan told reporters after Scotiabank's annual meeting of shareholders on Tuesday.

"Let's come out of the spring market and see where we are," he added. "But if it remains overheated, it's time for action."

Bill Downe, the CEO of Bank of Montreal, put responsibility for any measures to cool Toronto's hot housing market squarely on Ontario Premier Kathleen Wynne, and the province's legislature.

"I'd leave it to the Premier with respect to specific tactics," Mr. Downe told reporters.

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Cherise Burda, executive director of Ryerson City Building Institute, and John Pasalis, president of Realosophy Realty Inc., discuss the merits of a foreign-buyers tax in Ontario
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