The head of Barratt Developments, Britain’s second most valuable housebuilder, gave warning yesterday that the decline in the housing market would continue into the new year as he revealed that sales of his own company’s new homes have fallen by 14 per cent since the summer.

Mark Clare, the chief executive, said that his company’s sales volumes would most likely end 17 per cent down for its second half, ending on New Year’s Eve, compared with last year.

He expects prices to stagnate, with zero growth during 2008.

Sales reservations for new homes would continue to fall if, as expected, the debt markets continue to make it hard for lenders to offer the sort of cheap mortgage deals that house-hunters had become used to over the past few years, Mr Clare said.

Barratt’s sudden deterioration in trading over the 19 weeks to November 10 is the worst sales performance admitted to so far by any of the country’s big housebuilders since the run on Northern Rock.

Mr Clare said that Barratt’s sales slowdown was part of a wider problem. He said: “An interest-rate cut would help in terms of customer sentiment. We have lost Northern Rock, one of the most competitive lenders for pricing. There is a repricing of risk and that is hitting the affordable end of the market for mortgages.”

Shares in Barratt fell yesterday to a four-year low, down 5 per cent to 480p, part of a wider sell-off in both housebuilding and commercial property stocks as fears intensified that both property markets were heading for a repeat of the 1990s recession.

The share prices of Barratt, Persimmon and Taylor Wimpey – who together accounted for about four out of every ten houses sold last year - have fallen by between 50 per cent and 60 per cent since the start of this year.

Barratt has managed to keep its prices stable or marginally ahead this year, but that has come at the cost of volume.

Mr Clare has refused to accept the heavy discounting being demanded over the past few weeks by buy-to-let investors, ready to buy ten units or more off-plan.

It is understood that these sorts of buyers are asking for discounts of 15 per cent or more off the asking price.

Barratt has increased its use of sales incentives, such as paying a deposit for first-time buyers, but still managed to increase its average sales prices by 2 per cent since July.

Barratt’s deterioration in trading was reflected by separate figures released yesterday from Rightmove, the country’s largest housing website, pointing to a housing market that has ground to a halt.

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