By Fergal Smith

TORONTO Greater Toronto Area (GTA) home prices increased in May from April and sales rose sharply, adding to evidence that the housing market has turned a corner after being buffeted by higher borrowing costs.

The average price of a GTA home rose to nearly C$1.2 million ($892,193) in May, up 3.7% from April, Toronto Regional Real Estate Board (TRREB) data showed on Friday. It was the fourth straight month of gains.

On a year-over-year basis, the average price remained lower, but the pace of decline slowed to 1.2% from 7.8% in April. The average price was 10.3% below the February 2022 peak.

"The supply of listings hasn't kept up with sales, so we have seen upward pressure on selling prices during the spring," said Jason Mercer, chief market analyst at TRREB.

New listings fell 18.7% year-over-year in May. In contrast, sales rose 24.7% on an annual basis and were up 20% from April.

"The demand for ownership housing has picked up markedly in recent months," Mercer said. "Many homebuyers have recalibrated their housing needs in the face of higher borrowing costs and are moving back into the market."

The Bank of Canada has paused its interest rate hiking campaign since January after lifting its benchmark rate to a 15-year high of 4.50%.

Still, higher financing costs for developers have contributed to a slowdown in Canada's residential construction activity, which could thwart government plans to reduce a housing shortfall.

($1 = 1.345 Canadian dollars)

(Reporting by Fergal Smith; Editing by David Gregorio)