Number of new homes being built down by 27%

The level of new homes being built fell by 27% during the first quarter of the year to hit a seven year low, official figures showed today.

The Office for National Statistics said £1.44 billion worth of private housing was started during the period, the lowest figure since the final quarter of 2000.

The value of new starts for the first three months of the year was 27% lower than in the final quarter of 2007 and 29% lower than in the same period of 2007, as a combination of the credit crunch and housing market slowdown took its toll on the sector.

The slowdown in the new homes sector also appears to be gathering pace, with the level of starts falling for the fourth month in a row during March to just £420 million worth of properties, the lowest figure since November 2000 and nearly half the recent peak of £793 million reached in May last year.

Last week one of the UK's largest housebuilders Persimmon said it was putting new projects on hold, after reporting a 24% drop in sales during the year so far.

The group, which owns Charles Church, said the property downturn had accelerated during the past three weeks, with lower sales volumes and higher cancellation rates.

A week earlier Taylor Wimpey said orders since January were 26% below last year, with trading falling off since March as first-time buyers faced particular difficulties in securing mortgages.

The housebuilding sector is taking a battering from the credit crunch, which is restricting people's ability to secure a mortgage and trade up or get on to the property ladder.

Orders for public sector and housing association properties were also subdued at £312 million during the first quarter, 27% less than during the previous three months and 36% below the same period of 2007, according to the ONS.

But orders for private and public infrastructure were 24% higher than during the three months to the end of December at £1.32 billion, while demand for public projects, excluding housing, rose by 20% to £1.37 billion.

Commercial orders fell by 15% quarter on quarter and industrial orders were 6% lower at £2.66 billion and £609 million respectively.

Overall total orders across the construction sector were 8% lower than both the previous quarter and the first quarter of 2007, as rises in infrastructure and other public projects, failed to offset weaker demand for housing and commercial and industrial building.

Housing Minister Caroline Flint said: "It is not unexpected to see short term trends in the market as a result of current global economic conditions.

"Long-term demand for housing remains high and the fundamentals of the economy are sound, with low unemployment and historically low interest rates.

"It is therefore essential - and in their own interest - for housebuilders to base their decisions on the solid footing of the economy and longer term trends."