A Canadian home price tracker known to be one of the most reliable measures of appreciation just recorded its highest annual increase since October 2017.

The Teranet-National Bank Home Price Index rose 9.6 percent over the previous year in January, led by double-digit price increases in local markets including Ottawa-Gatineau, Halifax and Hamilton.

Montreal and Toronto also posted 12-month price gains above the national average, while five other major markets experienced increases between 0.8 percent and 9.1 percent. Of the 11 markets included in the index, only Calgary recorded an annual decline in its home price reading.

While the annual gains were robust, the January data, published today, pointed to an overall slowdown in Canadian home price appreciation. January marked the third straight month that the index recorded a lower price gain than the previous month.

After gaining momentum last August, the price index accelerated for several consecutive months before slowing down in November when it recorded a monthly gain of 0.9 percent compared to October’s 1.3 percent. The index slowed again in December with a 0.6 percent monthly increase. According to the latest reading, the index climbed only 0.3 percent in January compared to the previous month.

In commentary published today in response to the Teranet-National Bank data, Capital Economics’ Stephen Brown acknowledged the price appreciation slowdown may seem surprising, especially considering the national housing market is exceptionally undersupplied relative to strong homebuyer demand.

“With home sales at a record high in January, it is hard to make the case that the latest coronavirus restrictions are behind slower price growth,” Brown wrote.

“The explanation may simply be that, with house price inflation at double-digit rates in many cities, house prices already reflect the sharp fall in borrowing costs in the past year and so there is now much less scope for prospective buyers to bid up prices,” he continued.

Despite the apparent deceleration in price gains, Brown maintains that the limited supply of homes on the market will keep prices increasing “at a decent clip by pre-pandemic standards.”

Looking further ahead, he forecasts the Teranet-National Bank index will continue rising in the 10 percent range at the national level in the coming months before slowing to five percent later in the year. Brown writes that deteriorating housing affordability and rising mortgage rates will contribute to the slowdown.