Toronto real estate prices continue to climb amid fresh calls for more protections against the possibility of rising interest rates.

Toronto Real Estate Board (TREB) figures released Friday, showed home sales rose 10.6 per cent in May, compared to the same month last year.

Board officials blame the shortage of listings - 6.4 per cent or 1,230 fewer last month compared to May 2015 - for driving prices up 15.7 per cent from the same period last year.

Toronto home prices increased $64,262 on average to $782,051, compared to the same period last year.

Region-wide, the average was $751,908, up from $739,082 in April.

The latest statistics come only days after the Paris-based Organization for Economic Co-operation and Development (OECD) called on Ottawa to further tighten mortgage lending rules.

Scotiabank also called on the federal government to consider higher down payment qualifications even though Ottawa just raised the minimum requirement in February for a CMHC-insured loan on homes over $500,000: up to10 per cent from 5 per cent on new mortgages.

But that had little impact, said TREB director of market analysis Jason Mercer.

In December, when the new rules were announced, a TREB survey showed many people who were seriously considering a 2016 home purchase, had a substantial down payment.

"The majority of households that are borrowing money to purchase a home are still acting prudently and certainly have a mind towards the future as well," said Mercer.

Federal borrowing rules aren't the only government policies that need to be examined, he said. Provincial land use policies and municipal taxes such as Toronto's land transfer tax are also part of the picture.

"When we think about prices going up we often think about the demand side. Really the big story in the GTA is listings. If we had more listings the market would be more balanced so we wouldn't be seeing as strong a price increase as we have," he said.

People, who might be thinking of selling a home, worry they won't be able to find another one due to the low supply and they choose to renovate rather than list, said Mercer.

External reports from agencies like OECD have been consistently wrong for the last decade, said James McKellar, professor of real estate and infrastructure at the Schulich School of Business at York University.

"There's no evidence that people are putting themselves in that kind of danger. The banks in Canada are very good at monitoring the housing market and I haven't seen them pull back," he said.

The lack of supply is due, in part, to the influx of immigrants into the GTA, added McKellar. Many consider real estate the only safe investment.

The federal government could step in with new regulations to make mortgage approval more onerous. But the banks would likely argue there's no evidence that their mortgage portfolios are under threat, he said.

There is nothing more the federal government can do about residential mortgages, said John Andrew, an assistant professor at Queen's University.

"More would just be punitive for first-time homebuyers who are already facing these inflated payments to begin with. The whole rules around mortgage insurance are kind of built around the concept of a $350,000 house. That's increasingly unrealistic," he said, adding that mortgage insurance is probably the only kind of insurance that protects the lending institution rather than the consumer.

Instead, he suggested Ottawa could step in to limit foreign investment with new taxes for residential properties. While it's not as big a problem in Toronto as it is in the Vancouver, Andrew believes it has been underestimated as a factor that is driving up prices.

Homeowners will do everything they can to pay for their principle residence. But once the math doesn't work, an investor will walk away. That's the real risk with Toronto's galloping condo market, he said.

"I don't think this is an imminent concern but rates will go up and it's entirely possible once they start to go up they could climb quite rapidly. Even 6, 7 or 8-per cent, would be more than enough to have the math not work for people and they would be predominantly investors."

TREB reported that the largest May over May increase was in detached homes in the 905-area communities surrounding Toronto. Prices in that category rose 21.2 per cent to an average of $891-870. In Toronto, detached house prices rose 15.2 per cent to $1,285,693 on average.

Loading... Loading... Loading... Loading... Loading... Loading...

The greatest shortage of listings remains in the category of semi-detached homes, down 13.8 per cent in Toronto and 4.8 per cent across the region. Semi prices rose 11.8 per cent region-wide to $670,074 in the GTA

The average Toronto region condo rose 5.9 per cent in price over last May.

With files from Dana Flavelle