The number of Toronto-area homes sold last month fell nearly 35 per cent and the average selling price dropped more than 12 per cent from historically high levels set last year, the Toronto Real Estate Board reported Tuesday.

There was a total of 5,175 residential transactions through the board's MLS system last month, down 34.9 per cent compared to the 7,955 sales in February 2017.

The region's average selling price, covering all types of residential resales, was down 12.4 per cent to $767,818 — still one of the most expensive in Canada.

Detached houses — the most expensive of the major categories tracked by TREB — showed the biggest declines in both the number sold and sales price compared with last year.

The detached category had also been the driving force behind a spike in prices in the early months of 2017 that prompted the Liberal provincial government to introduce a package of measures last April to cool the market.

That was followed by a financial stress test for buyers, which officially came into effect on Jan. 1 for federally regulated lenders, following an October announcement by the Office of the Superintendent of Financial Institutions.

"When TREB released its outlook for 2018, the forecast anticipated a slow start to the year compared to the historically high sales count reported in the winter and early spring of 2017," TREB president Tim Syrianos said Tuesday.

"Prospective home buyers are still coming to terms with the psychological impact of the Fair Housing Plan, and some have also had to re-evaluate their plans due to the new OSFI-mandated mortgage stress test guidelines and generally higher borrowing costs."

Interest rates rising

Interest rates for mortgages have risen over the past year as a result of moves by the Bank of Canada and fluctuations in the bond markets.

However, higher borrowing costs and OSFI's stricter requirements didn't slow the Montreal market — which marked the 36th straight increase and the busiest month of February since 2012 for the Greater Montreal Real Estate Board.

The Montreal-area board reported Tuesday that home sales in Quebec's largest market — which hasn't seen a spike like Toronto's — grew five per cent year-over-year in February, and prices were up across all major categories of properties.

The median price of single-family homes across Greater Montreal was $310,000 last month, up six per cent year-over-year, while plexes reached $481,500, a one per cent increase. The median price for condominiums grew by five per cent last month, with half of all units selling for more than $250,000.

"The acceleration in price growth is a direct result of increasingly tighter market conditions, which can be explained by a decline in the supply of properties for sale," said Mathieu Cousineau, president of the GMREB board of directors.

Supply below average

The number of active residential listings in the board's Centris system was 26,252, down 17 per cent compared with last year.

In the Toronto area, the number of active listings in TREB's MLS system totalled 13,362 and there were 10,520 new listings, below the 10-year average for the month of February.

Jason Mercer, TREB's director of market analysis, said the supply of listings will likely remain below average in many neighbourhoods in the Greater Toronto Area and that could "further hamper affordability" over the long term.

In the coming months, however, Mercer said TREB expects to see a pickup in sales and selling prices relative to last year in the spring and summer — which had seen a drop-off after the provincial housing package was announced.

"Expect stronger price growth to continue in the comparatively more affordable townhouse and condominium apartment segments," Mercer said Tuesday.