Shares in British housebuilders fell sharply on Friday, with sector leaders skidding over 8 percent, as reports of falling house prices and liquidity problems at mortgage lender Northern Rock raised concerns over reduced home demand.

By 8:20 a.m. EDT, shares in Taylor Wimpey, Britain's largest housebuilder by market value, had fallen 7.8 percent, Persimmon was off 8.6 percent and Barratt Developments were down 10 percent.

Shares in property Web site owner Rightmove Plc also fell 6.5 percent after it published a survey showing asking prices for homes in England and Wales fell last month for the first time this year.

You have the RICS (the Royal Institution of Chartered Surveyors) survey that came out yesterday. That was negative. You have the Rightmove report. That was negative. And you have Northern Rock. That's about it, Tom Gidley-Kitchin at Charles Stanley told Reuters.

The sector has been particularly hit this morning, but also the construction sector had an impact to some extent and the non-food retail sector as well. All those have to do with (concerns over) consumer spending and residential property, he said.

Property companies were also dragged lower, with Land Securities falling 3.7 percent and British Land down 3.5 percent.

Housebuilders have had a rough run this year as five interest rate rises since August last year have pushed borrowing costs to a six-year high, dampening buyer confidence and thus cooling the rise in housing prices, which has shown a double-digit percentage increase this year.

Concerns over the health of the housing sector increased further on Friday after Northern Rock, which has lent aggressively to home buyers, received financial assistance from the Bank of England due to a sharp rise in borrowing costs between banks.

The sector has underperformed the FTSE 100 by 7 percent this year.

As buyers delay home purchases amid uncertainty over interest rates, housebuilders have flagged that the market has become more competitive, with builders providing more incentives and promotions at the expense of reduced margins.