A huge shortage of homes is beckoning as builders confirm a 43 per cent plunge in the number of homes being started since 2007.

In a new analysis of 200 builders and developers, the survey, compiled by Knight Frank, says three and four-bedroom homes are now in greatest demand, although many builders are still sitting on land acquired in the boom.

Knight Frank says land values have also crashed by 40 per cent from their peak in the final quarter of 2007.

In less affluent areas, more builders are now acquiring land on a phased payment basis, to ease pressures on their cashflow.

Between the first quarter of 2008 and the first quarter of 2009, land values plunged by 45 per cent with some of the biggest falls in London (47 per cent) and the South East (41 per cent).

The report says that in the past two years, builders have switched sharply away from city centres and have adopted a 'back to basics' approach by building "traditional style, two-storey houses at lower densities in convenient and desirable locations on the edge of existing urban areas".

But the industry continues to face two major stumbling blocks: An acute shortage of mortgages and the government's commitment to localism, which will usually boost local opposition to further housing development.

Knight Frank says a total of 103,000 new homes were started in 2010, 42 per cent below the number recorded in 2007.

It also thinks that government plans to 'dangle the carrot' of cash rewards for local authorities which permit more new homes is unlikely to counter nimby (not in my back yard) attitudes except, perhaps, in poorer areas where there will be in any case less demand for new housing.

In 2011, says Knight Frank, builders are optimistic that the number of starts will rise by 18 per cent, with completions also expected to rise by 13 per cent.

But new home prices slipped by four per cent in 2010 and there is consensus that prices are likely to continue their downward trend this year.