Homebuilding in Britain has fallen to a 84-year low as falling house prices and dwindling numbers of buyers hit construction firms, a new report shows.

Some 135,000 private houses were started this year, down from 203,500 last year, figures from the Construction Products Association and Ernst & Young show.

It is the lowest number of housing starts during peace time since 1924, when housebuilders started work on 87,000 properties.

There are fears that housebuilding could grind to a virtual halt in the new year as more housebuilders stop work. Several large construction groups have postponed starting new projects as they try to drum up buyers for existing completed homes.

Housebuilders have said that the number of buyers reserving properties has halved in the past year, and more potential buyers are walking away from their initial deposit rather than complete a sale while house prices continue to fall.

House prices have fallen by 18 per cent since the market peaked in summer last year, according to figures from Halifax, and one of Britain's leading bankers said yesterday that the country was only half way through the housing market correction.

John Varley, group chief executive of Barclays, said that property prices could fall by a total of 30 per cent. He also predicted that unemployment could rise to 7.5 per cent, up from the current rate of 5.8 per cent.

Construction firms have laid off tens of thousands of workers this year, and are forecast to cut more jobs next year as the housing market continues to slump.

SOURCE: The Times