More than £400 million was wiped off the combined value of Britain’s “big seven” quoted housebuilders yesterday as fears intensified that Barratt Developments and Taylor Wimpey may be forced into huge debt-for-equity swaps. The latest fall in share prices leaves the combined market value of the big seven at less than £4 billion. A year ago the same companies were worth £18.5 billion.

Shares in Barratt were hit worst, tumbling 24 per cent to 91¼p - after briefly touching 85¾p - a low last suffered when Barratt nearly collapsed in the early 1990s. The share-price fall wiped £101 million from its market value, leaving the group, which is labouring under £1.7 billion of debt, worth only £317 million.

A year ago Barratt shares were changing hands for nearly £11, valuing the company at £3.8 billion. It had just completed a £2.2 billion cash acquisition of Wilson Bowden at the height of the housing boom.

Taylor Wimpey, the largest British housebuilder by production, which is closing about a third of its sales offices, was also hit badly. Its shares fell 15.6 per cent, down 12p to a long-time low of 65p, wiping £126 million from its market value – now £686 million. In the spring of last year Taylor Wimpey shares hit a high of 455½p, valuing the group at £4.8 billion shortly after the all-share merger of George Wimpey and Taylor Woodrow.

Mark Hughes, an analyst with Pan-mure Gordon, the broker, said: “There are three fears: writedowns, rights issues and debt-for-equity swaps. That has led to fear and hedge funds shorting against the stocks. To try to be logical about land values has gone out of the window. Barratt and Taylor Wimpey shares have rights issues factored in. More important is the dilutive effect of a rights issue and debt-for-equity swaps.”

Concerns are mounting that Barratt will be forced to write down the value of its landbank by hundreds of millions of pounds this month as it revalues its sales sites for its June 30 financial year-end. With signs that the housing market will deteriorate further, writedowns are likely to be even greater by the end of December.

That could push Barratt closer to breaching loan-to-value covenants on its bank borrowings. Investors are concerned that by the end of this calendar year, without a rapid rise in sales or a fundraising exercise, Barratt may have breached bank covenants calculated on how much its interest is covered by earnings. Alastair Stewart, a Dresdner Kleinwort analyst, issued a “sell” note on Barratt, telling clients not to buy at any price until the financial picture is clear. He said that Barratt would have to raise at least £1 billion to survive.

Housing stocks have come under assault after the publication of a string of gloomy industry surveys. These have revealed, among other things, that confidence in the sector is at lows last experienced in the housing crash of the early 1990s and that volumes of house sales between March and May fell to a 30-year low.

Both Barratt and Taylor Wimpey have gearing of about 50 per cent, the highest among their sector peers, but their debt-to-equity ratios are based on landbank valuations at least six months old, before the downturn in the housing market gathered pace.