Barratt cuts losses but warns of threats to building sector

House prices fell much faster than expected last month, according to mortgage lender Nationwide, raising fears that Britain could be heading for a double-dip recession.

Barratt, which is building more houses than flats at present, said it will focus on price rather than volume and will not reinstate dividends, unlike rivals York-based Persimmon and Bovis.

The group said conditions in the housing market have steadily improved over the year, but the number of buyers and sellers is still "extremely low" by historical standards.

Barratt, the UK's largest house builder by volume, said market conditions forced it to build fewer sites, which would do "little to address the nation's fundamental housing shortage".

Despite this Barratt is opening seven new sites in Yorkshire this year including two sites in Pickering and developments in Doncaster, Brough, Market Weighton, Leeds and Castleford.

The group said it has seen strong demand for houses in Yorkshire.

Chief executive Mark Clare said: "It's early days in the autumn-selling season but so far private reservation rates are in line with expectations and prices are holding up."

Arbuthnot analyst Kate Moy said: "There's all sorts of challenges ahead and if you're concerned about the risk of a double-dip then Barratt is probably seen at the top of the list for further impairments."

The group posted a pre-exceptionals loss of 33m in the year to June 30, an improvement on the 144m loss last year, and up on analyst expectations for a 38m loss.

The company, which trades as Barratt and David Wilson homes, said it benefited from a 10.9 per cent rise in its average selling price to 174,300 over the financial year, primarily due to the move away from flats to houses.

The group reported a slowdown in trade in the 10 weeks since the end of the financial year, with net private reservations down although this is in line with seasonal trends.

Looking ahead, chairman Bob Lawson said economic uncertainty may influence the company's future.

He said: "The key restriction on the industry remains the availability of mortgage finance.

"Whilst there was some improvement during the year, the lack of availability of suitable higher loan to value products continued to restrict the new build sector where customer deposits have traditionally been lower."

Analyst Chris Millington at Numis Securities said he expects the group to move into pre-tax profit in 2011.