House sellers and estate agents were optimistic in January and at the start of February as asking prices rose by 2.3%, or an average of £4,321, but buyers showed they were prepared to hold out for more realistic prices.

The report, published by the property website Rightmove today, showed that over the past three months sellers have dropped their prices by 2.1%. In spite of falling prices over the past six months and predictions of a flattening in the market over the coming year, sellers kept faith in the traditional Spring price boom and increased asking prices to an average £193,830, compared with £189,509 in December and early January.

However, a surge in the number of properties coming to the market could see many disappointed as buyers are increasingly spoilt for choice. There are now 30% more properties available for sale than there were last February.

The average property now takes 85 days to sell, two days shorter than last month, but around a month longer than the time spent on the market in the summer of 2004.

Miles Shipside of Rightmove said: "The buoyant economy, low unemployment, and historically low interest rates mean most sellers are not forced to reduce prices to sell as they are not facing economic hardship. They are shielded from having to slash prices to sell, and can afford to sit and wait to test the market before considering a price reduction or accepting a lower offer."

However, he added, some buyers are also prepared to sit out the higher prices and continue to rent. "They are either waiting for prices to drop back substantially to help them afford a better property, or the urgency to buy has been removed by plenty of choice of suitable property being available at fairly static prices," he said.

Mr Shipside said that the resultant stand-off would eventually work itself out, but added that if the wider economy remains strong, this may take some months.

"Land Registry figures already showed a sharp decline in housing transactions completed towards the end of last year, and we could see this trend continue into 2005, resulting in the lowest annual transaction volumes since the 1990s, without the trigger of a crash," he said.