House building will plummet over the next five years, Hometrack predicts.
The sector has already experienced a 10% decrease in volumes over the past 18 months.
Further falls would threaten to de-rail the government’s targets for house building, including the creation of three million new homes by 2020.
Hometrack says the government’s increasing focus on the environment is driving up building costs, which in turn is deterring house builders and developers.
Housing minister Caroline Flint’s plan to create 10 eco-towns with zero-carbon homes is a case in point.
Hometrack claims that builders are also being discouraged by factors such as increased consumer demand for houses instead of flats.
Richard Donnell, director of re-search at Hometrack, says: “Any hopes that the problems facing the housing market are a blip are misplaced.
“The key to growing housing output is getting more land into the system, but the government doesn’t understand how land for new housing feeds into the market and how this can encourage supply.”
Peter O’Connell, policy manager at the Federation of Master Builders, says: “Rising sustainability standards will lead to cost increases and green initiatives will end up pushing up house prices.
“The government must realise that it can’t raise standards without increasing costs.”
A spokesman for the Department of Communities and Local Government says: “First-time buyers and families desperately need new homes but this country has not been building enough of them for a generation.
“This is why the government has committed itself to building 240,000 more homes every year until 2020. Our priority is meeting the long-term housing needs of the country.”
He adds: “With housing contribut- ing 25% of the UK’s carbon emissions, it’s vital we build green, sustainable properties.”