By Fergal Smith

TORONTO (Reuters) -Canadian home sales fell in August, the first full month of data since the Bank of Canada's latest interest rate hike, while new listings continued to rebound, data from the Canadian Real Estate Association (CREA) showed on Friday.

Home sales declined 4.1% in August from July but were up 5.3% on an annual basis. The Bank of Canada left its policy rate on hold earlier this month after lifting it in July to a 22-year high of 5%.

"August was the first full month of housing data following the Bank of Canada's July rate hike, so a dip in activity was expected," said Shaun Cathcart, CREA's senior economist.

"The demand is obviously still there, and it will be back, but as the housing affordability crisis re-emerges as a top policy issue, for now, the slowdown on the buyer side should help keep a lid on prices."

To address affordability concerns, Canadian Prime Minister Justin Trudeau said on Thursday that his government will remove the federal 5% sales tax on the construction of new rental apartment buildings.

The industry group's Home Price Index edged up 0.4% on the month and was also up 0.4% annually, while the national average selling price was up 2.1% on the year.

New listings rose 0.8% from July, adding to a cumulative gain of more than 24% between March and July. It brings new listings closer to average levels after starting off 2023 at a 20-year low.

"With sales slowing and new listings returning to more normal levels, demand and supply are continuing to come into better balance," said Larry Cerqua, chair of CREA.

(Reporting by Fergal Smith; Editing by David Holmes)