The credit crunch and the crisis at Northern Rock hit the housing sector yesterday as Barratt Developments, Britain’s largest housebuilder, revealed a slump in sales of 10 per cent over the past two weeks.

Barratt blamed the sharp fall in September sales on a crisis in consumer confidence as potential homebuyers were spooked by the queues outside the country’s fifth-largest mortgage lender.

Mark Clare, Barratt’s chief executive, stopped short of predicting a slump in house prices. But he admitted that it was not clear how quickly the market would return to normal. He warned shareholders to assume that there would be “downward pressure” on the number of properties it sells in the short term.

Barratt is the first of Britain’s housebuilders to go public on a sales fallout from the collapse of Northern Rock. Barratt built about one out of every ten new homes sold last year.

Investors in the housing market will have to wait nearly three months before the next trading updates from Persimmon and Taylor Wimpey, which together account for about another two out of ten new homes built each year.

Delivering a robust set of annual figures for Barratt’s trading to the end of June, Mr Clare said his company’s reservations had fallen between 5 per cent and 10 per cent over the week ending last Saturday compared with the week before.

Mr Clare said the company, which also owns the David Wilson brand of upmarket homes, would typically see a “strong upward trend” in reservations in September, the end of the first quarter of Barratt’s financial results.

He said: “Was it a surprise? It was not a surprise. The consumers have quite rightly taken [Northern Rock] into account when buying. Is that going to recover fast? Our expectation is that it is but there is still uncertainty.”

Mr Clare and Mark Pain, finance director, predicted that the problems surrounding Northern Rock may mean househunters have to wait until the new year before there is a return to the “competitive frenzy” between mortgage lenders for cheap lending deals.

Fears over the reaction of the housing market were first stoked after Northern Rock, the UK’s fifth-largest mortgage lender, revealed this month that the Bank of England had agreed to provide emergency support after wholesale debt markets closed down. Northern Rock is one of the country’s largest lenders of cheap mortgages. Its removal from the market could leave househunters with fewer affordable mortgage deals. That in turn could hit house sales even further.

Hardest hit have been sales of Barrat’s flats in the Midlands and the North of England — particularly around Northern’s Rock’s Newcastle base.

Despite the past week’s sales slide, Barratt’s forward sales position has now grown to £1.721 billion, which together with completions to date means that it has secured 53.8 per cent of its full-year target.

Barratt sold 17,168 homes in its financial year to June 30, a 17.6 per cent annual rise. Pre-tax profits rose by 9.3 per cent to £427.8 million on turnover up 25 per cent to £3 billion. But the £2.2 billion takeover of Wilson Bowden earlier this year left Barratt with £1.33 billion of debt compared with £34.9 million of net cash in June last year.

Mr Clare’s long-term confidence is reflected in a 15 per cent rise in the full-year dividend to 35.68p.

Barratt won a fiercely contested auction for Wilson Bowden in February of this year, just months before fears of sharp slow-down in the UK housing market materialised.

Mr Clare, who only took over as chief executive at the end of last year, decided that to expand its share of the upmarket homes market in which Wilson Bowden is a significant player. Annual figures out yesterday revealed the price paid for Wilson Bowden included £816.7 million of goodwill, but Barratt said that value was comfortably supported by strong cashflows from its housebuilding business.

Mr Clare said that the company expected to make savings of at least £30 million in the first full-year post the Wilson Bowden acquisition and at least £60 million in the second year, up from respectively the £25 million and £45 million promised when the takeover was announced.

Barratt has shed 400 jobs as planned from the merger of the two firms, chiefly by removing duplicate head office roles. The new enlarged group has also benefited from better deals on larger bulk-buys of building materials.

Barratt quadrupled its sales of its iPad-branded starter home to 120 completions over the past financial year. Barratt is on course to build thousands more of the compact homes where prices start from £80,000 each.

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