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(Adds details from report, background; changes dateline, previous TORONTO)
By Leah Schnurr
OTTAWA, Oct 14 (Reuters) - Sales of existing Canadian homes edged up in September after four months of declines, driven by gains in the hot market of Toronto, while Vancouver continued to cool following a tax on foreign home buyers.
The Canadian Real Estate Association said sales were up 0.8 percent last month from August, with regional markets split.
Sales rose in the Toronto region and fell further around the lower mainland of British Columbia, extending a recent trend.
Low borrowing costs have propelled Canada's housing market since the financial crisis, but surging prices in Toronto and Vancouver have fueled concerns about a potential housing bubble.
In a bid to address affordability issues for residents, British Columbia imposed a tax on foreign buyers in Vancouver in August.
Data has suggested that market was already slowing before the tax, and Friday's report showed September sales were down 1.7 percent in Vancouver. Compared to a year ago, sales slumped 32.7 percent.
"We're continuing to see the B.C. markets, and Vancouver in particular, cooling," said Robert Hogue, senior economist at Royal Bank of Canada. "So we were concerned about overheating, I think is being addressed."
In addition, Canada's Liberal government tightened mortgage rules and closed a tax loophole on home sales earlier this month in its latest bid to cool the market.
The federal measures will likely put further downward pressure on resales, but what impact they have on prices will depend on the region, said Hogue.
The first of the measures, stress tests for insured home buyers, will come into effect on Monday.
CREA's chief economist, Gregory Klump, said first-time home buyers, particularly those in expensive markets, may be priced out by the new regulations.
In the Toronto region, sales were up 3.1 percent in September. Nationally, actual sales, not seasonally adjusted, were up 4.2 percent from a year ago.
National home prices slowed slightly, with CREA'S home price index up 14.4 percent in September compared with the year before. That was down from an annual 14.7 percent in August, making for the first deceleration since March 2015.
Greater Vancouver was still one of the biggest gainers, up 28.2 percent, while the greater Toronto region climbed 18.0 percent. Though home prices in oil-sensitive Calgary have held steady since May, they were down 4.1 percent compared to a year ago. (Additional reporting by Jeffrey Hodgson in Toronto; Editing by Bernadette Baum)