Commentary: Timid tinkering won't stop slump

Nobody disputes that the property market is gripped by its worst crisis for almost 20 years. By the end of this year prices could easily have fallen 20 per cent from last summer. The gloomier City analysts predict that a "peak to trough" collapse of up to 40 per cent is on the cards.

The reason is clear. A dearth of buyers, particularly the market life blood of first-timers, means vendors are having to accept offers massively below what they could have hoped for a few months ago.

Is this all bad? Not necessarily. The property market was clearly out of control in the two to three years leading up to the credit crunch. In London this caused social problems such as the inability of key workers to find homes in the communities in which they worked. A correction had to come. For the vast majority of home owners it will not be a problem. Like residents who stayed put in New Orleans, they will just batten down the hatches and wait for the tempest to pass. Those who have to move because of life changes will be able to get a better deal when they trade up. But for a minority of forced sellers who have lost their jobs or been overwhelmed by debt, yes, times are very tough.

Today's timid package of measures will make a difference for a few. But bolder steps are needed. The Government should recognise that its inflexible stamp duty bands have contributed to the problems. They helped create a shortage of property, which in itself was a major factor in the unhealthy property boom. Rather than suspend them it could make the tax "progressive" like income tax. So, for example, a buyer who pays £600,000 for a house only pays the top four per cent rate on the last £100,000, not the full £600,000.

Perhaps more importantly, the Government needs to persuade the banking industry to start lending again, particularly to first-time buyers. The industry has swung from the madness of lending six times salary to shutting up shop completely. Until it recovers its nerve, there is little to stop the market slide continuing - certainly not today's well-intentioned tinkering.