Persimmon, Britain’s largest homebuilder by market valuation, has added to the housing sector gloom with a 19 per cent fall in its order book and predictions of zero price growth for the year ahead.

The company has stepped up its levels of part-exchange in an attempt to boost sales and is trying to squeeze suppliers’ costs to help its margins.

Already this year, Taylor Wimpey and Barratt Developments, which, with Persimmon, account for more than a quarter of new homes sold in Britain, have said that they hoped to drive down costs from suppliers.

Declaring a 1 per cent increase in pretax profits to £585.1 million, Mike Killoran, Persimmon’s finance director, said that present trading was “competitive”, adding that the company had traded through “a tough last quarter and that has continued . . . It has been a cautious start to the year.”

Turnover last year was down 4 per cent, to just over £3 billion, after a 4.8 per cent drop in the number of homes sold. Persimmon’s forward order book stands at £1.05 billion, against £1.3 billion this time last year. Visitor levels at the group’s Persimmon and Charles Church showrooms are down 13 per cent on last year.

To deal with the slowdown in sales activity, Persimmon has increased its use of part-exchange – one of the key indicators of a sluggish overall housing market.

The company had £147 million of houses bought in part-exchange deals on its books at its December 31 year-end, £80 million more than the stock of similar unsold housing at the end of 2006.

The stock of part-exchange properties has, however, decreased over the past two weeks, to £125 million. Mr Killoran said: “We have increased the level of part-exchange as people [househunters] want certainty. It is good business for us. The recent reduction shows that if the secondhand market is priced correctly, it will move well.”

Signs of a gradual thawing in the housing market emerged from Persimmon’s cancellation rates on reservations, which last week were running at 19 per cent, a fall from the 30 per cent levels recorded during the autumn. A year ago, when the housing market was roaring ahead, cancellation rates ranged from 17 per cent to 19 per cent.

Total costs fell by 5 per cent last year, including a 2 per cent cut in prices paid to suppliers, savings from building smaller homes and 1 per cent of savings from the takeover of Westbury in 2006.

Mr Killoran said: “We are in the throes of negotiations with suppliers, working with them on costs for the benefit of both parties.”

Strong cashflow has reduced gearing to only 31 per cent, down from the 78 per cent level of gearing two years ago, when Persimmon completed its £643 million acquisition of Westbury.

Persimmon is regarded as the most likely big builder to buy any smaller British operators that run into trouble over the coming months as sales slow throughout the industry. Redrow is widely tipped as a takeover target.

The full-year dividend rises by 10 per cent to 51.2p a share.

— The value of the buy-to-let mortgage market rose to £24.1 billion in the second half of 2007, up from £21.2 billion in the first half and 16 per cent more than in the same period of 2006. However, 0.73 per cent of buy-to-let loans were in arrears of more than three months at the end of the year, up from 0.58 per cent a year earlier. Across the wider mortgage market, arrears stood at 1.1 per cent. The proportion of buy-to-let properties that were repossessed also rose to 0.18 per cent, compared with 0.13 per cent in 2006 and 0.23 per cent across the whole market.

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