TWO of Britain’s biggest housebuilders are expected to trigger fresh worries over the state of the housing market this week by confirming that reservation levels at their developments have plunged by more than 20% compared with a year ago.

Persimmon and Barratt, which report financial results this week, are tipped by City analysts to caution that reservation levels have dropped by 20%-30% as buyers struggle to secure attractive home loans following a clamp-down on riskier mortgages.

Despite the expected bad news on forward reservations, both companies are likely to say that visitor levels to their sales sites remain robust and that average selling prices are holding reasonably firm – even though incentives have ticked up.

Barratt is offering first-time buyers the opportunity to buy 100% of a property for 75% of the purchase price through an interest-free loan under its Dreamstart scheme.

The recent cut in interest rates is thought to have led to a slight improvement in buyer activity since January.

Both builders are expected to say they are optimistic that conditions will improve in the second half of the year. Analysts also expect them to say they are increasing dividend payments.

Since its £2.2 billion takeover of Wilson Bowden last year, Barratt has axed more than 400 jobs. Persimmon is expected to confirm this week that it has slashed hundreds of jobs after merging regional offices.

The number of homes built this year will be significantly down on 2007 levels. The latest statistics from the National House Building Council show that private-housing construction starts plunged by 40% during January compared with a year ago, to 9,135 homes.

The snowballing bad news prompted Alastair Stewart, analyst at Dresdner Kleinwort, to claim last week that Britain’s housing market was a “pack of cards” set to tumble because of “reckless lending” and “overbuilding” of flats.

The projections came as it emerged that Barratt was carrying out a strategic review of Wilson Bowden Developments, the commercial-property arm it acquired in the takeover. It is understood there has been a string of unsolicited approaches for the division in the past few months.

Only last year Barratt cited increased access to commercial and mixed-use developments as one of the reasons why it paid a staggering £816.7m of goodwill as part of the Wilson Bowden takeover.

But now City sources say the Barratt management team regards the division as a “noncore” operation, but insists that no formal decision about a sale has been taken.

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