There were six per cent fewer homes sold in Canada in May compared to the previous month, the biggest monthly drop in nearly five years, but prices are still higher than where they were a year ago.

Home sales fell by 6.2 per cent last month, the Canadian Real Estate Association said Thursday, largely on the back of a huge decline in Toronto, where the volume of homes sold fell by more than a quarter.

May is typically a strong month for sales as buyers take to the outdoors after the winter.

The month-over-month drop occurred after Ontario announced new rules aimed at cooling the housing market. A 15 per cent foreign buyer's tax is among the measures that were released.

"Recent changes to housing policy in Ontario have quickly caused sales and listings to become more balanced in the GTA," CREA president Andrew Peck said.

MONTHLY HOME SALES IN CANADA

But BMO economist Sal Guatieri said the sales slowdown in Ontario is likely to be just a blip that may not continue after the new rules are fully digested by the market. 

"This merely returned sales to some semblance of normalcy after a manic winter," he said. "The Ontario government's policies have temporarily returned the Toronto and Greater Golden Horseshoe housing situation from a raging seller's market to a more balanced playing field — for now."

Home prices, meanwhile, continued to climb on an annual basis, but they too were lower in May than they were in April.

The average price of a Canadian home sold on the multiple listing service (MLS) was $530,304 in May, up 4.3 per cent over the last year, but down more than five per cent on a seasonally adjusted basis from April's level.