Sellers remain in denial

Sellers remain in denial

Home sellers pushed up asking prices for property last month, despite a significant slowdown in the housing market and a lending squeeze by the major banks, according to figures compiled by online estate agents Rightmove.

People putting their homes on the market for the first time raised their average asking prices last month to £239,655, an increase of 0.8% or £1,799 on the January figure.

Rightmove said sellers were deluding themselves that buyers were prepared to pay high prices at a time of heightened anxiety. It said sellers were "ignoring market reality" when the credit crunch was already cutting deep into the number of sales and consistently dragging down sale prices.

The rise in asking prices took the Rightmove index almost back to last year's peak, though evidence that Britain's housing market is heading for a prolonged slowdown has been piling up for months. The snapshot of the market from the Royal Institution of Chartered Surveyors last week showed a near-record number of surveyors reporting falling prices and the most unsold properties for 10 years.

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Miles Shipside, commercial director of Rightmove, said: "Most sellers seem to be ignoring the increased competition from unsold properties and the challenge buyers now face in obtaining a mortgage. Sellers should price below their competition to achieve more interest now and avoid a larger price drop later in the year."

He said prices tended to overshoot in a boom and readjust over time. "With sellers still launching their properties on to the market at close to peak figures, it is likely we are in the midst of such an overshoot. Whilst sellers are dropping their prices after a few weeks after no interest from buyers, the gap between sellers' initial price and buyers' ability to pay appears, paradoxically, to be widening." He urged sellers to "get smart and accept this new reality" or risk the market seizing up.

The survey also found the average number of unsold properties in estate agency branches reached 67, up from 56 a year ago. "This is evidence of the slower rate of sales, giving credence to forecasts that completed transactions will be under a million this year," he said.

guardian.co.uk © Guardian Newspapers Limited 2008