Overall, taking into account the decline in house prices as the year drew to a close, house price growth sat at 3 per cent for 2007.
However time taken to sell is currently at an all time high of 8.3 per cent, pushed by a combination of market volatility, the availability of adequate or sufficient financing and the introduction of HIPs. This means that the market could be facing its own 'liquidity squeeze' in first quarter of 2008.
"There have been two distinct phases of activity across the housing market in 2007," said Richard Donnell, Hometrack's director of research. "The real impetus behind the headline rate of growth in 2007 came from the central London market as well as the key commuter routes of southern England, where values were being driven ahead by a lack of supply and strong demand.
"Indeed, our analysis shows that the boom of early 2007 was actually limited to just 30 per cent of the market. Across the rest of the country house price growth was far more subdued and interest rate increases were already beginning to bite.
"The second half of the year has seen a major reversal in confidence on the back of higher interest rates and concerns over the outlook for the financial markets. The greatest turnaround in market conditions has been seen in southern England where the market is slowing off a high base.
"Many would-be buyers have stepped back and the greatest short-term casualty has been lower levels of market activity with sales volumes down by 18 per cent over the last 6 months."
House price reductions have, according to Hometrack, been concentrated in the areas where the market has been generally weak over the course of 2007, or where the market has slowed off a high base. South Yorkshire, Nottinghamshire and North Lincolnshire have all seen a decline of up to -1 per cent.
Due to the methods of data measuring, Hometrack has accepted that it's annual figure is likely to be lower than other transaction based indices. This is because the Hometrack survey measures the 'achievable' price of housing across all postcodes taking evidence from areas of both high and low levels of market activity.
Donnell continued: "Just as the financial markets have faced a liquidity squeeze, so the housing market is in danger of facing its own liquidity squeeze in the first half of next year.
"High transaction costs, a weak outlook for prices and continued uncertainty among vendors creates the potential for a major lack of housing coming to the market in the first quarter of the year.
"In our view this will act as a support to prices while also leading to greater price volatility in those markets where there is the greatest lack of supply. Overall we expect average prices to rise by just 1 per cent over 2008 with sales volumes projected to be down 17 per cent.
"The reality is that we need to see a prolonged period of low, single digit house price inflation to bring the relationship between incomes and house prices back towards a more sustainable level.
"Lower interest rates and continued growth in household incomes will help to ease the affordability pressures but it is a trend that will need to run for a good 12 to 18 months."
