Click here to see the volume of sellers activity since Jan 2007

This is meant to be a buyer’s market: house prices are falling and homeowners who are struggling with mortgage repayments are being forced to sell. In theory, cash-rich, chain-free buyers should have the pick of the market and be able to bag a bargain.

Try telling that to Larissa and Fergus Caheny, who have been searching for a new house since they sold their home in south London in May last year. The couple would like a large period property with an easy commute to work and near good schools for their daughters, Darcy, 2, and Siena, six months.

They have been scouring Kent, from the outskirts of London to Tunbridge Wells, while living in a house in Black-heath they bought to let out – so far in vain. Rather than accept lower offers, sellers have been withdrawing from the market in droves as prices fall.

“They are holding back,” says Larissa, 37, a chartered surveyor. “There is not a lot on the market and the homes on sale have been on for a while. If I find something that ticks all the boxes, it is out of my budget. Last month, I made an offer on a house near Tunbridge Wells at about 20% below the asking price, but it was rejected. We’ll bide our time and see what happens in the spring.”

Kats and Dan Scott face a similar problem in London. The couple sold their flat in Chelsea in April and have been hunting for a family house in the area since. “I have viewed more than 40 houses and seen everything there is to see online,” says Kats, 29, who owns Memento, a company that sources bespoke corporate gifts. “I keep registering with agents who just send me the same stuff. I know everything off by heart.”

When they finally found something in Battersea, southwest London, in July, their offer at 12% below the asking price was rejected. “We upped it a bit, but they still rejected it,” Kats says. “There are distressed sellers putting their homes on the market, but these are not the properties we want to buy. People who aren’t desperate to sell are going to take their time. They are not going to take a hit.”

Research carried out by Knight Frank for The Sunday Times confirms the notion of a “sellers’ strike”. “It isn’t the easiest time to buy,” says Liam Bailey, the estate agency’s head of residential research. “There isn’t as much choice as you would expect. It’s getting to a stage when more sellers are withdrawing than putting properties on the market.”

Bailey has found the number of sellers taking homes off the market in London rose by 150% in the 12 months to the end of October. Outside the capital, the rate was 132%. New instructions fell by 14% in London and 13% elsewhere. The rate of withdrawal is even more pronounced for pricier properties: the number of homes in the £1m-£5m price bracket that were taken off the market jumped by 203%.

Estate agents fear the market could be slowed even further by changes to the rules on Home Information Packs (Hips) announced last week by Mar-garet Beckett, the housing minister. From April 6, sellers will have to include a Property Information Questionnaire providing a summary of information about the property, covering issues such as flood risk, gas and electricity safety, service charges, structural damage and parking arrangements. Crucially, they will also be required to have the pack ready as soon as they put their property on the market – rather than enjoying a 28-day grace period.

The government claims the move will improve the buying and selling process, but James Pace, head of Knight Frank’s Chelsea office, is sceptical. “I can understand the principle,” he says. “But in reality, it’s a crazy extra layer of bureaucracy we don’t actually need.” Such rules could act as a further disincentive for people such as Tim and Christie Fairburn, who have been trying since April to sell Hall Farm, their five-bedroom country house near Lincoln. The property, on sale with Humberts estate agency, went on the market for £1.475m – a fairly conservative valuation given that it has a gym, an indoor pool, 15 stables and 15 acres of land. There were no offers, so, in July, the Fairburns cut the price to £1.295m. Three months later, they put it down to £1.175m – all to no avail.

The couple, in their forties and with two children who have left home, bought the property for more than £1m just over a year ago and intended to stay for at least 10 years. They spent £250,000 on a new kitchen, bathrooms, flooring and central heating, as well as doing up the stables. But Tim, a professional show jumper, has developed a back problem and finds the house too big.

“This is our final price,” says Christie, an actress. “We can’t afford to accept any less than that. If there are no takers, we will do what we have to until the market picks up. We know a lot of people who have taken their homes off the market. Trying to sell now is stressful and completely pointless.”

So, with the market already all but closed for the year, the question is, what will happen in the spring? Who will blink first – buyers or sellers?

“The market won’t improve after Christmas,” says Jonathan Bramwell, head of country for the buying agency Prime Purchase. “There is going to be a downturn for another 12 to 24 months. Some sellers will be able to see out the downturn. Others are just ignoring the situation.” As the economy slows, Knight Frank forecasts that prices will fall by 30% from their 2007 peak, taking values back to where they were in September 2003. So far, the agency believes, we are only halfway through that correction, and we will not hit the bottom until next year. It will take much longer for prices to return to the highs that were reached last year. London is expected to recover first, returning to peak values in 2012, followed by the southeast and the north of England in 2014.

Repossessions and forced sales, meanwhile, look set to rise – despite measures announced by the government in the Queen’s speech earlier this month to help those who fall into temporary financial difficulties hold on to their homes. The latest figures from the Council of Mortgage Lenders show that repossessions are set to increase by 70% this year to 45,000, with some predicting they could reach 75,000 in 2009.

How many of these will be homes of sufficient quality to attract buyers such as the Cahenys or Scotts remains tobe seen. In the meantime, as the market continues to worsen, sellers who have held out and refused to cut their price may find themselves wishing they had accepted earlier offers.

Larissa Caheny is prepared to be patient. “I have done all my research,” she says. “When the right house comes along, I’m ready to grab it, even it if takes another year to search.”

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