It says demand from buyers is now starting to exceed the supply of homes, which suggests the market is beginning to stabilise.
Consequently, there is a strong temptation for agents to overvalue homes to ensure they secure instructions over their competitors, when there is little chance the property will actually sell at that price.
Although the market has rallied to some extent, it is still undergoing a price correction and will continue to do so for some months to come says the estate agency.
James Hyman, partner for residential sales at Cluttons, says: “The market remains extremely fragile and vendors need to be realistic about the true value of their property.
“Agents who overvalue instil false confidence in the minds of sellers who believe they can hold out for higher prices, driving a further drop in transaction levels.
“A sustained recovery can only be driven by a continued steady rise in demand for homes, not inflated prices.”