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Interest in Barratt sparks share rally

Private equity stake-building in house builder Barratt Developments sparked a shares rally across the beleaguered sector today.

Barratt's shares soared as high as 35 per cent at one stage following news that US-based Polaris Capital Management had reached a shareholding threshold of 6 per cent.

Rivals such as Taylor Wimpey and Persimmon also enjoyed significant share hikes, with a broker upgrade for builder Bellway adding to the sector's rebound.

It is not thought that Polaris' share buying signals a potential bid for Barratt, but the move helped rekindle interest in the battered housebuilding sector.

Polaris claims to seek "the most undervalued companies worldwide" for its investment opportunities.

Its decision to buy shares in Barratt comes after the group saw its shares plummet amid fears for the sector as house prices fall and the market grinds to a near halt.

The stock sank to below 42p each last month, down from highs of nearly 1290p early last year.

Barratt also last week completed its refinancing agreement with banks under plans to bolster the group in the face of troubles, which will also see it shed 1,200 staff.

But a report at the weekend suggesting that fellow builder Crest Nicholson may need £100 million in fresh capital from 50 per cent shareholder HBOS indicates that the sector's woes are far from over.

If HBOS, which bought its stake in 2007 at the height of the housing boom, decides not to support the builder, it could see the lending banks step in and take control of Crest, according to The Sunday Times.

House builder Redrow is also said to be negotiating a new bank facility with its bankers.

The sector has been hit hard by the downturn in the house market, with the credit crunch leaving buyers struggling to raise finance, sending prices falling.

Halifax said last week that house prices have lost 8.8 per cent of their value during the past year, after a 1.7 per cent fall in July.