This weakening is being exacerbated by tougher lending conditions and lower consumer confidence in the wake of the credit and liquidity squeeze in global financial markets.
House builders report sharply lower activity and weaker house price growth, while private housing starts have fallen back over the last year.
The Government plans to increase the number of new homes in England to 240,000 p.a. by 2016 and beyond, all built to high environmental standards.
Whilst the commitment to increase house building is welcome, these long term plans are unlikely to have an impact over the next few years.
With robust activity in recent years the housing market is now more highly valued and vulnerable to economic shocks and changes in buyer sentiment than in previous years.
The weakening in new housing activity could be further aggravated if the demand and prices for high density flats and apartments falls off sharply. Recent sales of such properties have increasingly been to buy-to-let investors, including to overseas investors.
A sharp fall in demand from such investors could cause people to sell quickly prompting a sharp further fall in housing market activity.
Housing market conditions are expected to remain subdued during the next two years, dampening housing related construction, with housing starts forecast to ease back during 2008 and 2009.
Private housing repair and maintenance activity has weakened in recent years reflecting a decline in consumer expenditure on home improvements and the drop off in move related RM&I work.