The number of homes changing hands has dived by 53% during the past year, new figures show.
Just 59,000 residential properties worth more than £40,000 were sold during September, the lowest level since HM Revenue & Customs began issuing figures in this format in 2005.
The level was well down on the 126,000 homes that were sold during September last year on a seasonally adjusted basis, and only about a third of the high of 154,000 transactions which were completed in December 2006.
The figures also showed that 188,000 homes changed hands during the third quarter of the year, fewer than half of the 407,000 sales which were completed during the same period of 2007.
Property transactions for the year to date are also well down on last year's level at only 747,000, compared with 1.3 million during the nine months to the end of September 2007.
The property market has been hit by the combination of falling house prices and the credit crunch, which has limited the availability of mortgages.
People are delaying getting on to the ladder or trading up it in the hope that they will benefit from further price falls.
At the same time, those who do want to go ahead with a purchase are struggling to raise the finance they need as lenders have tightened their loan criteria.
Recent figures from the Bank of England showed that the number of mortgages approved for house purchase fell to a new record low of 32,000 during August, suggesting transaction volumes will fall further in the coming months.
Howard Archer, chief UK and European economist at Global Insight, said that although the data was a lagging indicator as it related to completed sales, it still provided further evidence of the "dismal state" of the housing market.
He said: "Affordability ratios are still relatively stretched despite the double-digit fall in house prices seen so far.
"On top of this, faster rising unemployment, heightened concerns over the economic outlook and widespread expectations that house prices will continue to fall markedly seem well set to depress housing market activity and prices for some considerable time to come."