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A "For Sale" sign is posted outside of at Toronto townhome Tuesday Oct. 25, 2011.

Tim Fraser/tim fraser The Globe and Mail

It's a title Vancouver is more than happy to relinquish.

Canada's hottest real estate market is finally cooling off, new sales figures show, much to the relief of those who have grown weary of talk of a West Coast property bubble.

At more than $761,000, the average cost of a Vancouver home is still higher than anywhere, but was 3.1 per cent lower in March than in the same month last year. Sales activity is slower, too, down 22.3 per cent through the first three months of 2012.

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But the data from the Canadian Real Estate Association indicate that Toronto's sizzling market is still gaining momentum, with average prices in the country's largest city soaring more than 10 per cent last month, to about $504,000.

The diverging fortunes of the country's two most important real-estate markets adds to the complexity of the policy decisions facing Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney. Both have issued repeated warnings about the high level of personal debt that Canadians are taking on to buy increasingly expensive houses.

But Mr. Flaherty has said he is reluctant to tighten the rules on mortgages again, believing that the market will correct itself, while Mr. Carney is unlikely to raise interest rates any time soon for fear of driving up the currency and hurting other parts of the Canadian economy.

Toronto and Vancouver together account for about one-quarter of all real estate activity in Canada.

The opposing directions of the two cities have resulted in a country-wide average price that's edging lower, easing economists' concerns of a U.S.-style crash. And should the trend continue, it may also ease the worries of officials in Ottawa.

"When it comes to housing, Toronto is not Canada, nor is Vancouver," Douglas Porter, an economist in Toronto at BMO Nesbitt Burns, said in a report.

"For most cities, the market looks well balanced, and is broadly moderating on its own accord."

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Nationally, the average price of a home fell 0.5 per cent to $369,677 in March from last year while sales rose 1.6 per cent.

"The slight decline in the national average price points to a tug of war between Toronto and Vancouver," Gregory Klump, chief economist for the Canadian Real Estate Association, said in a statement. "The decline in average price reflects the change in Vancouver's sales mix, not housing price deflation."

Despite the price drop, few in Vancouver are calling this a correction. The spring of 2011 saw a spike in sales of expensive luxury homes in Vancouver that is now skewing the data for 2012, some argue.

Real estate agent Steve Di Fruscia, who specializes in selling high-end homes, said the Vancouver market, particularly in pricey areas such West Vancouver, are in the midst of a "typical cooling-off period," after the frenzied activity of a year ago

"We're still on a very optimistic, greedy part of the year where people are trying to cash in on extra high prices, believing that we will have the same spring as we did last year and prices will continue to skyrocket another 10 to 15 per cent," he said.

Mr. Di Fruscia markets his clients' properties in both Canada and mainland China. Some have blamed Vancouver's high prices on an influx of so-called "foreign" and "speculative" money from foreign investors. However, Mr. Di Fruscia said 95 per cent of his sales of Vancouver homes are to Chinese buyers who are immigrating to Canada as citizens or permanent residents.

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There are no statistics on what, if any, impact foreign investors are having on the real estate market in Vancouver, Toronto nor the rest of Canada. Cameron Muir, chief economist of the B.C. Real Estate Association, suggested that in Vancouver, the number of foreign buyers are "much lower" than many people think, accounting for between 1 per cent and 3 per cent of the market.

In Toronto, a low supply of properties is leading to bidding wars that drove up the average price of Toronto homes to $504,117 in March. Toronto's average home prices have set a new record high in every year since 2000 and 2012 should be no different.

"We'd love to have more inventory to sell because there's no shortage of buyers looking for good inventory," said Kevin Somers, the broker area manager for Royal LePage Real Estate Services Ltd. in central Toronto.

"As long as the basic economic indicators and interest-rate outlook remain positive, people will always need a place to live and would rather own than rent in most cases."

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