What does the last housing recession tell us about this one? Given that the current downturn in activity and prices is sharper than in the early 1990s, does this mean its duration will be longer or shorter than last time?

Last week, we had Bank of England figures for mortgage approvals in January. At 31,000 for the second successive month, they were still near record lows. They were, however, up slightly on the 27,000 all-time low, recorded in November. The scale of the fall in approvals is dramatic: that low was 79% down on the 130,000 figure chalked up in November 2006. After such a drop, approvals probably did not have much further to fall.

Comparing that with the early 1990s, it is clear that the extent of the plunge in mortgage activity this time is much greater. Then, from quarterly approvals of 442,000 for April-June 1988, it took more than four years for them to hit a low of 191,000, down 57%, at the end of 1992. Mortgage activity then slowly crawled higher, but was essentially flat for two to three years, as were prices. The serious recovery in activity and prices did not get going until 1996.

Comparing then and now tells us that mortgage activity, measured by approvals, has a long way to go to get back to anything like “normal” levels of 70,000-80,000 a month. Activity has plunged so far that the industry would welcome a rise in approvals to, say, 50,000 a month, and it is possible that this would be enough to stabilise prices. It is a sobering thought, however, that to get back even to that kind of level would require a near-doubling of approvals from the November figure.

The early 1990s taught us that the pattern of a housing crash is an initial sharp fall in activity and prices, followed by a few years of stagnation before meaningful recovery sets in. What does that tell us about this time? The optimistic view is that the cycle has been compressed, with the downturn phase shorter and sharper, so the upturn will therefore come sooner.

Against this, the sheer scale of the downturn, the banks’ continuing problems and the prospect of a longer and deeper recession than in the early 1990s all argue for caution. We should have already seen the worst, at least in terms of housing activity. Meaningful recovery, however, still looks far off.

GO FIGURE

- PricewaterhouseCoopers expects a further fall in house prices of 15%-20% during the course of this year, with, at best, a bottoming out of the market during 2010 and a sluggish recovery thereafter. John Hawksworth, its head of macroeconomics, says this would mirror the pattern in the 1990s.

- Many of Britain’s coastal towns will receive a boost from a government-backed initiative to support a range of cultural and heritage projects. Beneficiaries of the Sea Change scheme include Great Yarmouth, which will receive a £3m grant to regenerate the Deneside area, and Southport, which will get £4m towards a new cultural centre. Hastings, Margate and Westward Ho! are also on the list

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