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The spring surge in Toronto house prices accelerated again in May, providing another sign of persistent inflation in parts of the Canadian economy before a key central bank interest rate decision next week.

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The benchmark price of a home in Canada’s largest city increased 3.2 per cent last month to $1.14 million on a seasonally adjusted basis, the third straight monthly increase and the biggest since the market peaked in February 2022, according to data released Friday from the Toronto Regional Real Estate Board.

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The average selling price, at $1,196,101, fell 1.2 per cent from May 2022 but rose 3.7 per cent from April 2023.

Home prices in Toronto and across Canada tumbled from record highs starting early last year as the central bank began a series of aggressive interest rate hikes to combat inflation. Immediately after the Bank of Canada paused that campaign this year, prices started to bounce back as buyers who had delayed purchases leaped back into the market, only to be confronted with a dearth of homes for sale. In Toronto, the benchmark price is already up 6.8 per cent since February.

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“The demand for housing ownership has picked up markedly in recent months,” Jason Mercer, the Toronto real estate board’s chief market analyst, said in a release accompanying the report. “The supply of listings hasn’t kept up with sales, so we have seen upward pressure on selling prices during the spring.”

Though there are some indications the surge in prices is starting to lure sellers back — new listings rose 10.1 per cent in May from the month before — the real estate board data shows that even after these homes were put up for sale, demand outstripped supply so much that the market only grew tighter.

One measure of how tight the market is, months of inventory, or how long it would take the market to work through its active listings at the current rate of sales, fell to only 1.3 months. Another measure, the sales-to-new-listings ratio, remained above 70 per cent, indicating more price gains to come, the real estate board said.