The Rightmove House Price Index recorded its lowest annual increase in house prices since April 2013, with prices in February only up 2.3 per cent on last years' figures.
In its latest report, the online property portal stated the slower pace of house price increases means over-priced properties are at greater risk of being unsold in the current climate.
Miles Shipside, director and housing market analyst at Rightmove, said: “The majority of the market is price sensitive with most agents we surveyed reporting that possible buyers are reluctant to enquire about a property just a few per cent too high in price.
"With the annual rate of price increase now at 2.3 per cent a property that is over-priced by more than 5 per cent will have to wait more than two years for the market to catch up with it."
Three quarters of agents (75 per cent) surveyed by Rightmove reported their local market as price sensitive and that an asking price more than a few per cent too high will harm interest levels in the property.
Rightmove analysis of more than 100,000 newly-listed properties shows sellers are 40 per cent more likely to sell with that agent if the property is priced right when they first come to market.
Rightmove noted while agreed sales were down by just 3.1 per cent in January, the largest fall came among starter homes with those comprised of one or two bedrooms or less down by 8.9 per cent.
Rightmove House Price index cited the experience of James Sims, director at Brik Estate Agents in Fulham in London, for price sensitivity in the market.
"We’re noticing that reducing properties by even a marginal 2 per cent to 3 per cent can make a significant difference to the level of interest from potential buyers," he said.
"As is usual at this time of year we’ve had more sellers of properties in higher priced brackets come to market, and so we’ve been working with them to make sure their property is marketed at the right price.”
eMoov, chief executive Russell Quirk, saw regional differences to such price sensitivity.
"In areas like the Midlands where prices aren't as inflated [as the south-east], a more no nonsense approach is benefiting homeowners as they proceed with their sale and see stronger, more natural price growth across the board as a result."
Jeremy Duncombe, director of Legal & General Mortgage Club, said the recent white paper was never going to have an instant impact on housing supply and therefore house prices.
“The white paper was a good first step in addressing the housing crisis.
"However, now we have had a multitude of announcements, the time has come to see real action on the ground that addresses the ongoing supply-demand issue, which continues to leave thousands of hopeful homeowners stuck in ‘Generation Rent.'"