Only seven of the 43 houses auctioned yesterday sold either under the hammer or immediately afterwards - an abysmal result that will force estate agents and vendors to reassess prices. Altogether, it's been a washout week in the auction rooms with over 70 per cent of properties failing to sell.

The reality is that the market has run out of steam, after record gains in house prices in the first quarter of 2006. However, agents were adamant that the underlying market is still strong and that the high failure rate at auction has been triggered by an oversupply in the mid to upper end of the market.

Yesterday's poor results will be a disappointment to the huge number who have put their homes on the market in recent weeks, hoping to match top prices obtained earlier in the year. Sellers will now be under pressure to reduce prices if they are anxious to offload their properties before Christmas. With such a vast choice available, buyers will be able to bargain down, rather than bid up for the home they want.

Some agents are blaming the failure to sell at auction on a greedy vendor syndrome, though in some cases they've created the problem themselves by valuing properties on the high side to get ahead of their competitors. The pressure will now be on them to shift these homes over the coming weeks to avoid another glut in the spring. Already some agents are advising vendors to hold back until next January.

The view from other agents is that this is a blip, rather than a collapse of the housing market. "Buyers are sitting on the fence, but there is plenty of sales activity after auction," says Keith Lowe of Douglas Newman Good. "Auction properties are still only a fraction of the overall market, less than 10 per cent. What happened this season was that 20 to 30 per cent more homes were brought to the auction market, but the buyers weren't there for them."

A total of 1,129 houses have been auctioned so far this year, compared with 954 for the same period in 2005. However the market was considerably stronger last year: in the same week last September, 54 per cent of properties auctioned sold .

Interest rates have risen since then and further rate rises seem likely. However, the rates are still historically low, the economy is buoyant and there's been no fall off in immigration - all reasons why the housing market should remain strong.