The property slump has wiped £13,500 off the price of the average home since the market peaked last October, according to figures from the Nationwide. But falling house prices can be good news: just ask Jane and Simon O'Gorman, who managed to trade up to a bigger house and save thousands of pounds in stamp duty as a result of the softening market.

Like many growing families whose ascent up the property ladder had been scuppered by prohibitively high prices, the O'Gormans thought they would have to make do with their three-bedroom home in Bredon, Worcestershire, for a few more years.

The couple wanted more space for their two children (Emily, 5, and George, 2) as well as an extra bedroom. The fourth room would double as a guest room for granny and an office for Simon, 33, a business development executive who occasionally works from home.

They had been trying to sell their home for £242,500 since last October but thought that they had no chance at a much larger four-bedroom house that was on the market for £285,000. The £42,500 jump was too big, and the 3 per cent stamp duty on properties over £250,000 would have added £8,550 to the cost of moving.

However, steady price falls since last autumn gave the O'Gormans the opportunity to negotiate a deal. Nationwide figures show that property values have fallen by 7.3 per cent since October 2007, with prices tumbling by 6.4 per cent since January 2008. The average home is now £172,415, or 6.3 per cent less than a year ago.

The fall in prices meant that the O'Gormans also had to drop the price of their home. They pulled the price down to £225,000 (a fall of just over 7 per cent) but in doing so they managed to secure the bigger property for £250,000. Not only is that a saving of £17,500, it brought the new property within the 1 per cent stamp duty band. The deal was negotiated in March and the family moved in a month later.

Jane O'Gorman, 31, said: “There was an awful lot going on in the news about falling prices at the time. Our estate agent told us that if we lowered our price he could get money off the next house we wanted. So we calculated that we would not be losing out. We wanted to stay in the village but four-bedroom houses rarely come up in Bredon.”

Although their offer was substantially lower than the asking price, they were helped by the fact that the sellers of their new home had to move quickly. Having a buyer for their old property also put them in a strong position to see off any competition. “The sellers had an offer for £265,000, which was nearer the asking price than ours, but the other party hadn't found a buyer for their own home,” said Jane O'Gorman. “The stamp duty threshold was a really big factor for us, and we stuck to our guns. We knew the house we bought had been on the market for as long as ours.”

Ian Southall, of Chess Moves estate agents in nearby Tewkesbury, Gloucestershire, helped the O'Gormans through the negotiations. Rather than keep the asking price for their home at £242,500, Southall suggested that the O'Gormans should be inviting offers over £220,000. “It was enough to wake some people up,” he said. “We are finding that massive reductions are being accepted on the basis that the seller can strike the right deal farther up the ladder. I've seen 10-15 per cent come off in some cases. It has taken time for the public to grasp that this is what is needed to achieve sales right now and that they will not be losing out.”

Even so, fears of falling prices are keeping many potential buyers out of the market. According to figures from Hometrack, the property data company, the number of property transactions has fallen by 30 per cent this year. The average person now moves home every 23 years compared with every eight to ten years in the 1980s. Richard Donnell, Hometrack's director of research, said: “This drop in volumes was always possible as around half of all transactions in recent years have been driven by aspirational or non-needs-based movers who are now sitting on their hands. The net result is a sizeable drop in transaction volumes, which look set to reach levels not seen since the 1970s.”

Donnell believes that the lack of confidence in the market will continue to push down prices. But such falls will benefit those who need to trade up. He says: “There are opportunities to use the current trends to get a better deal and trade up for less than one or two years ago.”

For anybody serious about moving, the best strategy in the tough market is to be realistic about prices. As David Bexon, managing director of email4property.co.uk, a network of local agent websites, puts it: “Now more than ever, your estate agent will be able to tell you how things are on the ground and guide you through the process. Taking their advice on pricing and offers could save several months of frustration.”

Fast facts

House prices fell by 2.5 per cent in the first half of 2008, including falls of 1 per cent in June.

Agents in 83.6 per cent of postcodes in England and Wales now report that prices in their area are falling, up from 53 per cent in May.

The average house for sale is now on the market for just over ten weeks, compared with six weeks in June 2007.

Sellers are accepting offers of an average of 91.6 per cent of the asking price.

Source: Hometrack

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