As the housing crisis deepens, the politicians' voices get louder. Not only do they want mortgage lenders to start lending again, but they want housebuilders to build thousands of new homes.

Never mind the economics, it's the votes that count.

Government figures show nearly 22,000 homes were built in London last year and Ken Livingstone promises to build another 30,500 a year if he is re-elected as Mayor.

Tory candidate Boris Johnson has called for "fresh thinking to get more homes built" while the LibDems' Brian Paddick wants "decent, affordable, rented accommodation" across the capital. It is a major political issue, and not only in London. A staggering 160,000 homes are planned for the Thames Gateway while nationally the Government and housing minister Caroline Flint promise 240,000 new homes a year by 2016.

But is this realistic? The answer from the City is a resounding "No" - the politicians are just playing politics.

Just 168,000 homes were built in Britain last year and a source described the 240,000 target as "a pipe dream". This was underlined yesterday when Persimmon said it has postponed building homes on new sites because it cannot sell them. It came with a warning that "unprecedented tightening in the mortgage market has caused a further deterioration of the housing market", and sent shares in the sector tumbling.

Persimmon chief executive Mike Farley said: "It is entirely possible the industry could build only 110,000 homes this year." Persimmon is not alone in reining in its building plans, even if other housebuilders are yet to admit it.

"It is pretty well accepted in the industry that that is what is happening," said Alistair Stewart, housing analyst at Dresdner Kleinwort. "The industry is shutting up shop.

"For the last few months the house-builders and a lot of the housebuilding industry have gone into massive retrenchment mode, even if they do not say so publicly. Some housebuilders have pretty much stopped buying any land whatsoever.

"For all of the housebuilders, cash flow is quite an acute issue. It doesn't mean they are getting close to breaching their covenants but it does mean they have got to change strategy."

During the current economic climate, this means caution. The industry is now at a tipping-point - if the housing market does not pick up, housebuilders will start laying off staff. Analysts warn that hiring new staff will not be easy once conditions have improved, extending the crisis by months if not years.

The problem is that would-be buyers either cannot afford inflated prices, cannot get hold of a mortgage, or are waiting for prices to fall.

Add to that fears of job losses, and demand for new homes has all but evaporated despite the chronic shortage of supply, particularly in London and the South-East. Nicholas Leeming, director of propertyfinder.com, said: "A growing population and a rising number of households mean Britain is crying out for new homes. This is nowhere more apparent than London, where overcrowding is at its worst and houses are most expensive.

"Unless the lenders provide affordable mortgages, builders won't be able to sell their stock and will have to cut back sharply. A further reduction in housing supply will store up more trouble for the future. People want to move. We have seen a big jump in the numbers of people searching for new homes on our site. But many simply cannot get mortgages."

James Rowlands of the Royal Institution of Chartered Surveyors said the sharp fall in share prices in the house-building sector - values have more than halved since early last year - highlights the issue.

"Even before the current market problems, housebuilding rates were well below the Government's highly aspirational target of 240,000 new homes each year," said Rowlands.

"This warning from the stock market shows that there is an immediate problem and housebuilding levels will fall further from where the Government is aiming to be. In the current climate, these targets are looking more and more unrealistic."

But politicians will be politicians, and housing minister Flint insisted the targets were "challenging but achievable".

"The conditions are right for a healthy housebuilding industry in the longer term," she said. "Therefore, it is essential - and in their own interests - for housebuilders to base their decisions on the economic fundamentals and longer-term trends."

With local and Mayoral elections around the corner, she would say that.