One year into the credit crunch and there seems no end in sight to the pressures facing the housing market. The greatest “downturn” has been in the number of homes being bought and sold. In fact, so few and far between are would-be buyers and committed sellers, the number of homes sold in 2008 is likely to be less than 800,000 – a level not seen since the 1960s. Last year, there were 1.2m transactions.

We should not be too surprised at this unprecedented decline in activity. After a seemingly endless growth in the level of owner-occupation over the past three decades, the boom cycle has ended with no actual increase in the level of home ownership over the past five years. This means that a significant proportion of recent transactions are likely to have been aspirational moves up the housing ladder, rather than a burst in the number of first-time buyers. Indeed, so strong were trading conditions between 2002 and 2006, nearly one in three homeowners moved house. Following such a surfeit of demand, it is no surprise that we have witnessed a large contraction in sales volumes - or that house prices have fallen.

It is hard to see how levels of market activity can improve in the short term, as first-time buyers - the fuel that feeds the bottom end of the market - have been squeezed hardest by the credit crunch. Since the start of the slowdown, the weekly cost of a mortgage for a typical first-time buyer has increased by 21%. And this before saving for a deposit.

The reality is that most of these would-be buyers are being pushed into the rental market, where, despite rents rising by an average of 9% over the past year, it remains, on average, £280 per month cheaper than buying. Only once these dynamics change, through lower mortgage rates or changes in the availability of credit, are transaction levels likely to improve.

There has been speculation about a stamp-duty holiday as a means of freeing up the market. This may sound like a good idea, but in reality will lead to confusion and compound low levels of activity as buyers find another excuse to wait. The fact is, low housing turnover is here to stay for the foreseeable future.

David Smith is away

Richard Donnell is director of research at the property analysts Hometrack

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