The huge decline in market activity in the 12 months of the credit crunch prompts two responses. The glass-half-full school thinks, when it comes to transactions, if not prices, things cannot get much worse. The half-empty camp, seizing on the Bank of England deputy governor Charlie Bean’s warning of tougher times ahead, sees things getting worse before they get better.

The latest figures for mortgage approvals from the British Bankers’ Association offered succour to both views. Approvals in July were fractionally up on June, suggesting activity may be bottoming out. However, the July figures were 65% down on a year earlier and came ahead of the confusion over stamp duty, which the industry says weighed on transactions in August.

Whether activity is close to stabilising depends partly on what the government comes up with this autumn. Opinion on stamp duty is divided. It will be hard for Gordon Brown and Alistair Darling not to do something, but even in a weak market, suspending stamp duty is costly. The Treasury expects £13.5 billion in revenue this year (though may not get it), roughly half of which will be from house purchases. It could be expensive gesture politics.

Similarly, suspending home information packs (Hips), which the National Association of Estate Agents has called for, might help, but only at the margin.

Hips have coincided with a grim year for the market. The problem remains one of mortgage availability, identified by the housebuilder Bovis, which posted another gloomy set of results last week.

The drop in buy-to-let lending has been less pronounced than feared. The Council of Mortgage Lenders reported 144,600 new buy-to-let loans in the first half of 2008, down from 176,500 in the second half of last year and 169,500 from January to June 2007. But the decline, 15% year-on-year, and 18% compared with the second half of 2007, was relatively modest and the number of outstanding mortgages grew just over 1.1m to £132.5 billion. The average maximum loan-to-value ratio slipped from 85% to 83%, compared with more drastic cut-backs for first-time buyers.

So reports of the death of the buy-to-let landlord appear to have been exaggerated. Optimists would say that is a good sign. Pessimists would say their pain is yet to hit home

homeeconomics@sunday-times.co.uk

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