The faltering housing market has taken its toll on Barratt Developments, Britain's second-biggest housebuilder, after its forward order book for new homes has fallen for the first time in almost four years.

Barratt, which bought its competitor Wilson Bowden in a £2.2 billion deal last April, also reported a slight fall in its average selling price across private and social homes from £179,500 to £177,900, which reveals the extent to which the market for new homes has changed.

Forward sales for the first six months of the year stand at £1.26 billion, compared with £1.34 billion at this point last year.

On a pro forma basis, assuming Wilson Bowden had been acquired on July 1, 2006, total completions fell from 10,623 to 9,056, reflecting an expected reduction in outlets, lower buy-to-let activity and tougher market conditions.

However, the forward order book was still higher than analysts' expectations and the company has secured 69 per cent of the year's forecast volumes at the halfway stage.

Mark Clare, group chief executive at Barratt, said: "Against a backdrop of a more difficult housing market, we have continued to trade satisfactorily with prices holding up and costs reduced.

"People are deferring a decision to buy a new home, lenders have toughened their criteria and we need to put a lot more effort into selling in a tough market."

However, he said that Barratt's forward order book had slipped by only 6 per cent, compared with a very strong previous year.

Looking ahead, the group said that it was too early to know how the market would perform. Spring is the traditional time for strong sales of new homes and the housebuilder hopes that its increased number of sales outlets and falling interest rates will reinvigorate the market.

"The situation is complex," said Mr Clare. "Buyers are looking at employment, inflation and absolute interest rates and on all these measures the economy is still strong. People are only deferring a decision to move and we expect that demand to return. Clarity of direction on interest rates starts to bring buyers back into the market."

Barratt said that it would continue to protect its margin, rather than push for volume sales. It is confident that it can deliver a 16-17 per cent operating margin in the first half, in line with guidance.

The company said that it continued to manage its land bank tightly in the face of a more challenging environment and that it would spend £300 million less on land than its previous guidance of £1.5 billion.

Barratt Developments was pushed out of the FTSE 100 index of leading companies in December, after its shares had fallen by around 50 per cent over the past six months.

It stock rose by 8.27 per cent today in early trading, to 392½p, valuing Barratt at £1.3 billion – lower than its current borrowings of £1.7 billion.

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