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People walk past a house that has sold in Toronto in this file photo.

matthew sherwood The Globe and Mail

Soaring demand for single family homes in the country's most expensive cities drove sales of resale homes to their highest level in more than five years last month, pushing up average resale prices more than 8 per cent.

Average resale prices jumped 11 per cent in both the Greater Vancouver and Greater Toronto areas last month compared to May, 2014, the Canadian Real Estate Board reported.

The board's measure of benchmark prices, which compares what the same property sells for over time, rose 9.41 per cent to $684,400 in the Vancouver area and jumped 8.9 per cent in the Toronto region to $552,400.

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Nationally, the benchmark resale price hit $493,100, up more than 5 per cent from a year earlier.

May is typically the peak of the housing market season, although the real estate board noted that hikes to Canada Mortgage and Housing Corporation insurance premiums for buyers with small down payments, which took effect in June, might have driven particularly strong sales last month. "Some buyers may have jumped off the fence and purchased in May to beat the increase," wrote board president Pauline Aunger.

Calgary's housing market responded to higher oil prices with a modest rebound from a winter downturn. Home sales rose 7.3 per cent compared with a month earlier, although they were still nearly 30 per cent below last year's levels. Benchmark prices rose 1.21 per cent compared with last year, the smallest price increase in three years.

Benchmark prices fell 3 per cent in Regina and were flat in Saskatoon, reflecting the broad impact of the slowdown in the energy sector on Western housing markets. "While oil prices have firmed up recently, they remain well down from where they were a year ago and their outlook remains uncertain," the board said. "In the Prairie region, this is dampening consumer confidence and sidelining potential home buyers."

Sales rose above last year's levels in half of the country's local markets, driving up the price of two-storey single family homes more than 7 per cent above last May's levels. Prices for bungalows and townhouses rose 4 per cent, while condo prices rose slightly less than 3 per cent.

Listings were flat compared to April, pushing available supply of homes for sale to its lowest level in three years. Economists noted the country is heading toward a seller's market, where buyers compete over a dearth of available homes for sale.

A shortage of single family homes, particularly in in B.C., will continue fuel a strong national housing market for the rest of the year even as prices are set to remain flat across Alberta, Saskatchewan, Quebec and Atlantic Canada, the board predicted in a new forecast.

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Sales are expected to jump 12 per cent this year in B.C., sending prices up more than 8.5 per cent this year, the board said. But rising prices will eventually turn against the B.C. market, the board predicted, with sales falling 3 per cent next year as home values soar out of reach of most buyers.

Economists are raising red flags about the hot housing market this year, warning that the Bank of Canada's decision to drop interest rates to historic lows fuelled a 0.7-per-cent rise in household debt in the first quarter of this year, most of it mortgage debt.

"As the first-quarter results demonstrate once again, the problem continues to be the same, namely the vitality of the real estate market," wrote Dejsardins Group senior economist Benoit P. Durocher. "Mortgage credit and household debt will increase as long as property prices increase significantly."

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