New home construction levels fell 29% year-on-year during the second quarter of this year as a consequence of private and public sector spending cuts, according to fresh data from construction industry analyst Glenigan.
Private housing project starts fell 31% year-on-year, while social housing also dropped 26%.
The study found that the underlying value of UK construction project starts fell by 24% during the three months to June compared to the corresponding period last year.
Allan Wilen, economics director at Glenigan, commented: "Housebuilders continue to be reluctant to start new sites and are focussed on completing existing developments as the housing market remains sluggish.
"However, the government's Firstbuy programme will help to bridge the mortgage gap for first-time buyers and Glenigan forecasts that private house building will stabilise by the end of 2011."
The government's Firstbuy programme, which will provide £250m to support first time buyers to purchase a new build home, is expected to help over 10,000 households with equity investments jointly funded with housebuilders.
However, the overall decline in the number of new homes being built is disappointing given that there is a severe housing shortage.
A lack of new homes being constructed in Britain has left millions of people living in overcrowded conditions, on housing waiting lists and unable to unable to get a foot on the housing ladder, as the supply-demand imbalance has pushed up property prices beyond reach in some parts of the country.
Official figures show that there were less new homes built last year than at any time since 1923, excluding the war years.