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New listings of Toronto homes surged in May from a year earlier while sales plunged and price gains slowed slightly in the wake of new housing rules aimed at cooling the market in Canada’s largest city.

Toronto Real Estate Board said on Monday the average home price rose 14.9 per cent in May from a year earlier, well below the pace of gains seen in recent months, while new listings jumped 48.9 per cent and sales fell 20.3 per cent.

The sharp shift in the Toronto market comes after a 15 per cent tax on property purchases by foreign buyers was introduced in April as part of 16 measures designed to cool the market due to fears of a bubble.

The real estate group said it was too early to say if the surge in new listings is in response to the new rules or simply sellers reacting to the recent surge in prices or whether the rise in listings or drop in sales will be sustained.

"In the past, some housing policy changes have initially led to an overreaction on the part of homeowners and buyers, which later balanced out," TREB's Jason Mercer said.

"On the listings front, the increase in active listings suggests homeowners, after a protracted delay, are starting to react to the strong price growth we've experienced over the past year by listing their home for sale to take advantage of these equity gains," he added.

The report showed sales of detached homes led the overall drop in demand in May, falling 26.3 per cent from a year earlier, while sales of condominium apartments were down by 6.4 per cent.

 
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