Home prices posted their smallest August increase in 12 years, according to the Teranet—National Bank National Composite House Price Index.

The monthly index gained just 0.2 per cent while three of the 11 metropolitan markets surveyed saw prices go down.

Vancouver, Victoria and Quebec City saw month-over-month decreases.

Compared with a year ago, the composite index was up 4.1 per cent from a year earlier.

The reading on home prices comes amid growing signs the Canadian housing market is cooling.

Earlier this week, the Canadian Real Estate Association cut its 2012 and 2013 outlook for home sales and lowered its national average price forecast.

The cut came as CREA reported August sales slipped 5.8 per cent compared with July and were down 8.9 per cent compared with August 2011.