By Andrea Hopkins
OTTAWA (Reuters) - Toronto home sales and prices surged in March, an industry report showed on Wednesday, fueling fears of a real estate bubble in Canada's largest city and ramping up expectations the province of Ontario will soon act to cool the market.
The average home price in Toronto jumped in March to C$916,567 ($684,823), up 33.2 percent from a year earlier, while sales increased 17.7 percent, the Toronto Real Estate Board said.
Toronto prices have more than doubled since 2009, even as the other parts of the country have moderated after repeated attempts by the federal government to tighten mortgage lending rules to rein in overheated markets.
With even mainstream Canadian economists calling the Toronto market a bubble and Finance Minister Bill Morneau saying national policies are not the best tool to tackle local market imbalances, the pressure has shifted to Ontario to address the problem.
Ontario Finance Minister Charles Sousa has said his provincial budget, expected within weeks, will address housing affordability.
"They are probably going to proceed cautiously and try to help out on the supply side without putting in policies that would potentially crash the market," said Michael Dolega, senior economist at TD Bank Group.
While most of the market speculation has been on whether a tax on foreign buyers will be levied in Toronto as it was in Vancouver last year, Sousa and others have argued for an increase in the capital gains tax on homes that are not principal residences to make speculation, or "flipping," more costly.
"I think they’re both on the table and I thought our chief economist made a very credible case for a speculation tax,” said James O’Sullivan, head of Canadian Banking at Scotiabank.
"We want to see it correct smoothly, we want to see a soft landing and what that would argue for is action sooner rather than later," O'Sullivan added.
Vancouver's market, the most expensive in Canada, has slowed since British Columbia levied a 15 percent tax in August 2016 amid concern that speculation by global investors, mostly from mainland China, was fueling a bubble.
But there are signs that market is bouncing back. March sales rose 47.6 percent from February and the benchmark price rose 1.4 percent in the month to C$919,300, the Vancouver Real Estate Board said on Tuesday. Sales were down 30.8 percent compared to a year ago and prices have fallen 0.8 percent in six months.
(Additional reporting by Matt Scuffham in Toronto; editing by G Crosse)