George's Café on North Woolwich road was long ago boarded up. The peeling flour mill on the southern edge of Victoria Dock has stood empty for a generation. A rusting iron fence surrounds these two remnants of an earlier age.

The railings enclose an otherwise empty 59 acres to the east of City airport.

This place, Silvertown Quay, should be echoing to the growl of earth-moving equipment and the shouts of men in hard hats. But here, silence speaks more eloquently than the cacophony of building work. It is evidence of the most serious collapse of the new homes market in living memory.

As we begin another week of the credit crunch summer, a new survey reveals that construction of new homes in London has ground to a virtual halt.

Fewer than 1,000 new homes will be started in the capital over the next six months on top of the 11,300 built so far this year, according to London Residential Research.

This 2008 total - of 12,300 - is a dramatic 60 per cent below the 28,800 homes built in 2007.

"We are not expecting to see any more large sites start this year," confirms LRR researcher Hannah Gardiner. "House builders are simply reacting to the market."

The advice for anyone who has reserved a new home is stark. Housing consultants London Development Research, which polled more than 200 developers, discovering a market on the brink of catastrophe, says: "If you have just put down a £2,000 deposit on an off-plan purchase, you ought to walk away - right now."

Across Britain, house-builders are mothballing developments. It is the biggest crisis since the 1930s, says Roger Humber, from the Home Builders Federation (HBF), which is pleading with the Government to take action.

A veteran of housing crises stretching back to the early Seventies, Humber said: "We've not experienced anything like this post-war. It really is on a scale we've not seen before."

From the smallest to the largest, building projects across London are being put on ice. Just one modest example is a development of 257 apartments on the Thames in Deptford - trumpeted in the salad days of last spring as "the new Hoxton". Developer Lane Castle now says that construction will not start until market conditions improve.

When Ken Livingstone became Mayor in 2000, planning permissions existed to build about 50,000 homes in London. Now there are 132,000 plots with permission and another 41,000 awaiting the green light from local councils. At current rates of construction, that little lot will keep builders in land for about 15 years. Got any land to sell? Forget it.

BUT the crisis is at its most visible with three flagship ventures - Silvertown Quay, the Greenwich Peninsula which has the O2 at its heart and the 2012 Olympic plans, which last week were plunged into further controversy when the developer charged with building the athletes' village admitted it could not raise the money for its share of the scheme.

It was all so different when, in March 2005, at a property trade show in Cannes attended by the construction industry's biggest hitters, Mr Livingstone looked forward triumphantly to the realisation of the £1.5 billion Silvertown Quay development and its centrepiece, the Biota! aquarium, an edifice the height of eight double-decker buses covering an area the equivalent of five football pitches.

The Terry Farrell-designed water world on the southern edge of Victoria Dock was to cost £80 million, partly funded by the sales of the new homes that were to be built around it.

"I intend to see the aquarium open in 2007, brilliantly close to my election date," was Ken's over-confident forecast. Then his re-election was a given. Then house prices were rising rapidly. Then house builders were paying stupid money for sites across London. Then even a fish tank in Silvertown sounded like a good idea.

But 550 species of marine life won't be moving into east London anytime soon. Biota! has been postponed for a year. With the credit crunch on the verge of becoming a full-blown recession, it's anybody's guess when work will start.

Building at Silvertown Quay should have begun months ago on 5,000 new homes and a town centre for the Royal Docks. The DLR station at Pontoon Dock stands ready. But there is no activity on the 5.3 million sq ft scheme that was given the full go-ahead in May last year. That was when the London Borough of Newham gave planning permission to a consortium chosen by the London Development Agency to build the new homes, along with shops, restaurants and a hotel - and Biota! Work on the first 300 homes has been pushed back to next year.

"We are in a much more difficult market now," admits David Taylor, the ebullient former head of English Partnerships and current member of the Olympic Delivery Authority, who chairs the Silvertown Quays consortium. "We are re-thinking the timetable."

"We", in this case, includes new Mayor Boris Johnson's very own London Development Agency, which owns the land, Japanese construction giant Kajima which is organising the job, and the Bank of Scotland which agreed a £119 million upfront loan last May. No guesses as to which one took fright and ordered work not to start.

The same heeby-jeebies are at play on the Greenwich Peninsula. Those brave enough to drive to the O2 for a concert or film premiere will be happy to know that the temporary car parks will be available for some time to come. It will be a long while yet before new homes rise on these sites.

There are plans to build more than 9,200 houses on the land semi-encircled by the Thames. Former deputy Prime Minister John Prescott's Millennium Village is well under way. But work has halted on a 22-acre site on the north-west rim of the peninsula. Here, a consortium has plans to build 3,000 new homes in a series of high-density blocks.

UK developer Quintain Estates and the Australian builder Lend Lease formed a joint venture last year to create the homes which - prophetically you might think - will have views across the river towards that other stalled development in Silvertown Quay. But at a meeting earlier this month Quintain edged back from a commitment to build anytime soon.

"We are preparing our premium product for the return of equilibrium in the markets... and will only develop and market this landmark development when propitious conditions return."

Translation: "Whose crazy up-market idea was this! Shut the shop."

Not even the Olympic Village at Stratford is immune from the credit crunch. The accommodation for 17,000 athletes and officials has to be finished by 2012 for obvious reasons. But the cost of building 3,500 homes before a single one can be sold is enormous.

Developer Lend Lease - also involved in the Greenwich Peninsula postponement - had hoped to get the financing sorted out before work was due to start last month.

Yet, as it was revealed last week, Lend Lease cannot find its £450 million share of the project, and the Olympic Delivery Authority has reluctantly agreed to immediately pump in £200 million of public money so that work could begin on time. Worryingly, it has been suggested that the taxpayer could be landed with the entire £1 billion cost of the village, but industry insiders believe a deal will yet be done.

Lend Lease is still trying to convince lenders to stump up the cash at reasonable rates of interest in return for a stake in the homes when they are rented or sold, after they are converted back into liveable space in 2013. Negotiations might take a while.

Meanwhile, the foundations are being dug. Fifteen firms of architects are designing the blocks to a "common chassis" dictated by Lend Lease. Large parts of the units will be prefabricated, some bits abroad.

THERE will be no kitchens - the athletes are supposed to eat in communal food halls. Conversion from athletes' crash-pad to bijoux flats for sale or rent will take at least six months, or will that be longer?

The collapse in confidence that is bedevilling Lend Lease is to be seen everywhere. The number of new mortgages granted in April was 58,000 - the lowest since records began. The Council of Mortgage Lenders has warned of a 40 per cent decline in sales. The Nationwide says house prices are falling at their fastest rate on record - and could be down 13 per cent by December.

The Home Builders Federation estimates that just 110,000 private homes will be built in Britain in 2008 - 30 per cent fewer than last year. That number, it warns, will fall to just 80,000 in 2009 unless interest rates are slashed and buyers are exempted from stamp duty.

The HBF has accused the Government of "dithering" and warned of mass redundancies unless action is taken. Housing minister Caroline Flint, accused of having her "head in the sand", says she is monitoring the situation.

Flint - who revealed her concerns by walking into Downing Street holding a confidential briefing paper in a transparent file - insists the Government target to build up to 240,000 new homes a year by 2016 is still attainable.

Unfortunately for Gordon Brown and his administration, this figure now looks extremely unlikely. Unless there is a recovery as dramatic as the slump, Brown will be lucky to see two million of the three million new homes he promised by 2020 when he looks back from his rocking chair in 12 years' time.

That is because, if the London figures are anything to go by, the picture is far worse than that painted by house builders. Here, starts are plunging at twice the national rate of 30 per cent. The 60 per cent fall revealed by LRR has also completely destroyed any hope of meeting housing targets for London set just last autumn.

At that time Ken Livingstone, in the last months of his mayoralty, said the capital needed at least 100,000 new homes by March 2011 to meet rising population numbers. Now, as site after site is boarded up, 20,000 to 30,000 looks more realistic. Minus a gigantic fish tank in Docklands, perhaps.

• Peter Bill is editor of the Estates Gazette.

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