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Faced with a collapsing market, home builders have been forced to adopt a defensive posture, says Neil Merrick

Everything went wrong so quickly. Just over a year ago, after Labour boldly pledged to build 3 million homes by 2020, the future could not have looked brighter for the house building industry.

But that was before it fell victim to the credit crunch. The stark fact is that today private house builders are embarking on fewer new builds than at any time since records began. During August, the National House Building Council received just 3,720 applications to start building homes from the private sector – 76 per cent fewer than 12 months earlier.

And this was no blip. Starts by private builders were down 65 per cent to 14,665 between June and August. If it were not for housing associations, which registered 10,432 starts (up 8 per cent), the overall picture would be even bleaker.

The NHBC predicts that during 2008/09 as a whole, work will start on between 90,000 and 95,000 homes. This compares with 185,000 last year. A modest recovery is expected in 2009/10, when 103,000 starts are forecast, but no one should get too excited.

The only crumb of comfort is that the number of new homes being completed is declining only slightly. ‘They’re holding up better than expected,’ says NHBC operations director Ian Davis. ‘Builders are completing stock and selling that before they start building.’