Barratt lures housebuyers with deals as its profits plunge

Barratt Developments is offering a raft of incentives including the scrapping of stamp duty, mortgage subsidies, and a price guarantee in a desperate bid to attract new home buyers after suffering a massive fall in annual profits and admitting the market still looked very grim.

The housebuilder says it will scrap stamp duty on properties worth up to £500,000, pay up to £1,000 a month of a customer's mortgage till 2010 and allow new purchasers to pay only 85% of the price immediately with the rest being paid over the next 10 years.

In addition, Barratt is promising to shoulder up to 15% of any loss on a house bought from the company but sold over a three year period as well as paying moving costs and offering to help people move up the housing ladder by buying their old home off them in a part-exchange.

Mark Clare, Barratt's chief executive, said its own research showed that customers needed these kinds of measures to help them through a difficult period. "We are delighted to be able to bring forward this package of measures to support home buyers throughout Great Britain," he explained.

The move comes as Barratt revealed that profits before tax had plunged from £424.8m to £137.3m while operating margins were down and the number of houses completed slumped by 14%. The final year dividend has been ditched and the value of the land bank written down by £208m but group sales rose 17%.

Clare insisted that the figures were "satisfactory" in an extremely challenging market and said Barratt's financial health has been strengthened through a £400m refinancing and a revision of covenants with its banks. But he admitted the housing market continued to look very tough.

"There is little prospect for any material improvement in trading conditions until mortgage finance and customer confidence returns," he added.

Shares in Barratt fell almost 2% to 155.75p and equity analysts at stockbroker, Panmure Gordon, predicted further write-downs - of up to £550m - in property values still to come in the next 12 months.

Many property experts believe that house prices have fallen 10% over the last 12 months and predict further declines, while the government has recently tried to kick-start the market by offering to suspend stamp duty - but only on properties up to £175,000 and only for the next year.