The latest Government house building figures appear to add weight to growing fears that unless there is a dramatic turnaround in fortunes the number of private homes built this year could fall by a quarter or more.

A fall of this scale would beat the 1974 drop of 24% in homes built for sale – the biggest post-War collapse in house building.

The figures show homes started in England by private house builders got off to their worst start since 1992. The plunge in starts – down 28% on a year ago – is evidence of the shuddering slowdown in activity and a shutting off of the house building pipeline.

Completions were 22% down on a year ago. This is worrying because with so much of the stock coming through as flats one may have expected an acceleration of work to finish off developments in the face of a toughening market.

More worrying still is that the bulk of the bad news has come after the first quarter – indeed it is the past two weeks that has seen sentiment in the industry turn from concern, to worry to fear.

The relentless bad news for the housing market this week suggests that the fall is at the beginning and the figures will deteriorate from here.

The RICS housing market survey posted its gloomiest figures yet – 95% of estate agents in England and Wales seeing prices drop. The line that the RICS is taking is that this is a sign of a broad fall in prices rather than a deep fall, with all regions suffering fairly evenly.

But as the RICS spokesperson Ian Perry points out the fall in house prices is not the most significant of the problems facing both estate agents and the house building and construction industries.

Transactions are the big issue and here there is a real problem. And this is what represents the biggest fear for house builders and the Government housing targets.

The latest transaction figures for property sales worth more than £40,000 (predominantly houses) show a third fewer transactions in the first quarter of 2008 compared with a year earlier.

And with the Council for Mortgage Lenders latest figures showing lending in March running at about half of the level of a year ago, there is little hope of a swift uplift in market activity.

It is this very low level of activity that is prompting house builders to stall on opening up new sites. More worrying still is that about half of new homes in the pipeline are flats. Flatted-schemes are heavily reliant on forward sales and investors and by implication are much more sensitive to market sentiment than more traditional housing developments.

The Caroline Flint gaff over the snapped Cabinet briefing note, shows that fears in Government over the house market are growing, but there remain questions within the industry over the poor response to date. Firstly, £200 million doesn’t buy a lot in today’s housing market. Secondly there are plenty of questions over whether this is the most appropriate policy response.

The emerging view that the fall in house building this year could be as dramatic as 25% or more is looking increasingly less fanciful. This should be of considerable concern to a Government that has such ambitious targets to build 3 million new homes by 2020.

The biggest collapse in private sector UK house building post-War is not really a good start on the way to that 3 million target.