Average prices were down by 0.2 per cent over the month with the annual rate of growth slipping to 0.4 per cent, the lowest level for two years since March 2006.
March house prices were down across 28.8 per cent of postcodes, the majority of which were located in London and the South East where values have been slowing off a high base.
However the survey highlighted a continued improvement in both demand and transaction levels, alongside the first increase in new buyer registrations since June 2007, a trend which continued throughout the month albeit to a lesser extent.
It also identified an 8 per cent increase in sales agreed over the month after a 20 per cent increase in February. The average time to sell a property remained at 8.5 weeks.
Underlying market conditions appear weakest in the East Midlands, Wales, and the West Midlands where the average time to sell is around 10 weeks and the proportion of the asking price being achieved is below average.
Richard Donnell, director of research for Hometrack, said: "Some bounce-back in market activity was inevitable after what has been a prolonged period of weak market activity.
"However the growth in demand over the last two months is only a third of the level seen in previous years so the spring market is likely to be a non event this year.
"Continued uncertainty in the financial markets, affordability pressures and weak buyer confidence are all likely to suppress levels of market activity in the months ahead with pricing levels remaining under pressure."
Despite this, demand for housing still exists but the majority of households simply do not need to move. Hometrack believes that transactions will be driven by two relatively polarised groups; one comprising households who need to move for employment or financial reasons, and the other made up of those with relatively small mortgages who see the current slowdown as an opportunity to purchase.
