Because if interest rates go up, people can't afford to borrow as much so they can't afford to pay as much.
Depends where you are in the market, but some segments will see a reduction in demand as result meaning anyone who *needs* to sell may have to accept less, which leads to the perception that equivalent properties are worth less.
You can set the price you want, but if the market doesn't agree with you then you ain't selling. You only have control within market limits, you're deluding yourself if you think you can set whatever price you want. Why do you think that areas with lower demand (like the north of England) have lower prices?
Personally I'd love to be able to sell my place for £100m and then retire to the Bahamas, but I doubt I'd get any takers.