* Toronto home prices up 31.7 pct in April

* New listings up 33.6 pct,lawrence hall of science birthday party sales down 3.2 pct

* Home Capital shares down 6.5 percent (Adds Home Capital share price)

By Andrea Hopkins and Leah Schnurr

OTTAWA, May 3 (Reuters) - Toronto home prices and new listings surged in April while sales fell, data showed on Wednesday, suggesting the market may be starting to rebalance after new rules were introduced to address fears of a housing bubble in Canada's largest city.

The Toronto Real Estate Board (TREB) said its home price index jumped 31.7 percent in April from a year earlier, while new listings rose 33.6 percent and sales dipped 3.2 percent.

Last month, the provincial government introduced a 15 percent tax on property purchases by foreign buyers as part of 16 measures designed to cool Toronto's red-hot housing market.

While TREB said it was too early to say whether the rise in new listings was in response to the new rules or sellers reacting to the recent surge in prices, the market will rebalance if the trend continues.

"If new listings growth continues to outpace sales growth moving forward, we will start to see more balanced market conditions," said Jason Mercer, TREB's director of market analysis. "It will likely take a number of months to unwind the substantial pent-up demand that has built over the past two years."

Canada's housing market has been robust in the years since the financial crisis, but the acceleration in prices in Toronto has led to worries that parts of the market are overheating.

Canadian subprime mortgage lenders raced to shore up confidence earlier this week as depositors pulled money out of non-bank lenders Home Capital Group Inc and Equitable Group's high-interest savings accounts.

Shares in Home Capital were down 6.5 percent to C$7.25 at 1015 EST on Wednesday. Ratings agency Standard & Poors downgraded the long term credit ratings of the company after the market closed on Tuesday citing factors including funding concerns. Home Capital also delayed its first quarter earnings.

Ontario's securities regulator has accused Home Capital of making misleading statements to investors.

The foreign buyers tax should cool demand, economists say, because it shows the Ontario government is determined to slow the market, even though there is little data showing those buyers are a large part of the market.

The long looked-for surge in new listings "certainly foreshadows a cool down in price growth," said Sal Guatieri, senior economist at BMO Capital Markets.

Guatieri said the uncertainty caused by the new government measures likely prompted buyers to hang back while sellers sped up plans to list their homes. (Additional reporting by Matt Scuffham in Toronto; Editing by Jeffrey Benkoe and Alistair Bell)

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