Housing prices in Toronto increased more than 8.5 per cent compared to last year, according to a report by Greater Toronto Area realtors. Of the 5,879 homes sold by the firm in September, the average selling price was $503,662.

The report also shows the total number of transactions fell by 21 per cent compared to September 2011 when prices were lower. However, September 2012 had fewer working days than years previous, bringing the per working day comparison to a decrease of 12.5 per cent.

"While sales have been lower due to stricter mortgage lending guidelines, we continue to see substantial competition between buyers. The months of inventory trend remains low from a historic perspective, which explains the strong price increases we are experiencing," said Toronto Real Estate Board President Ann Hannah.

September average selling prices were up compared to last year for all major home types. Price growth was strongest in the City of Toronto, including condominium apartments with eight per cent year-over-year growth.

"Barring a major change to the consensus economic outlook, home price growth is expected to continue through 2013. Based on inventory levels, price growth will be strongest for low-rise home types, including single-detached and semi-detached houses and town homes," said TREB’s Senior Manager of Market Analysis, Jason Mercer.

A report released Tuesday showed a different trend in Vancouver's housing market where both home prices and sales declined by 0.8 and 32.5 per cent respectively.