New Government figures have revealed how the credit crunch is affecting UK house building...

According to the Department for Communities and Local Government, there were 32,100 new housing starts in England in the first three months of the year - 21% lower than in the previous quarter, and 24% down on a year ago.

The slump in new starts is concentrated among private house builders, and government figures showed that their new starts have fallen by 25% in the first three months of the year.

Yesterday, house builder Barratt said its sales were falling significantly. It blamed this on the drying up of the mortgage market under the impact of the credit crunch. Similar messages have come this week from Redrow and Galliford Try.

Decline will continue

Last month, the building firm Persimmon said it would not build homes on any new sites until the situation improved. Thursday's figures from the DCLG suggest that if present trends continue, then new house building this year will hit its lowest level since before 1998.

Commenting on the DCLG’s figures, David Stubbs, RICS senior economist said:  “The figures show house building firms dramatically reducing the number of properties they are starting to build in response to a weak market and excess inventories of unsold homes.

"Given the on-going problems in the mortgage market and a weakening economy, the decline in house building will surely continue. This promises to makes the government’s pledge to build three million homes by 2020 a difficult one to keep."