Housebuilder Redrow has refused to panic despite profits sliding 22 per cent after a shift in business from expensive city apartments to affordable housing.
The Flintshire-based company said consumer confidence remained relatively weak, despite a seasonal upturn in autumn, as it posted a fall in pretax profits to £53.4 million for the six months to December 31.
Redrow which has 20 Midlands developments, said results covered a relatively quiet period.
Regional chairman John Tutte said: "It was not until October/November we began to see an improvement in the market. But in the New Year there have been more inquiries and the number of site visits are up. Our reservations for the first eight weeks are ten per cent up on last year, although we have six per cent more outlets."
Analysts believe economies of scale enjoyed by rivals such as Persimmon and Barratt may force the company into a merger with a similar-sized rival, possibly Bovis Homes.
Keith Bowman, equity analyst at stockbrokers Hargreaves Lansdown, said: "The move towards building lower cost housing has Redrow in a transitional period at a time when conditions are tough.
"However, an increased emphasis on the struggling first time buyer could eventually leave Redrow in a stronger position."
The average selling price for Redrow homes was down from £176,700 to £163,000.
This reflected the fall in the number of In the City apartments - which include the Jupiter development in Birmingham - from 446 to 152, while there were 105 completions in the new Debut range of affordable housing.
The fall in its average selling price was cushioned by an increase in sales of Redrow's Signature homes, up from 1,665 to 1,820 which left total sales broadly flat at 2,077 compared with 2,111 previously.
Forward sales were only just down on last year - 1,816 compared with 1,948 - but still "ahead of historic norms", while the landbank was up from 17,500 plots to 18,400 and provided a "platform for future growth".
Redrow unveiled plans for the Debut range in March after Deputy Prime Minister John Prescott challenged developers to build affordable homes to help first-time buyers and key workers get on the property ladder.
A total of 130 homes are being built at a scheme at Castle Vale, Birmingham, and 300 at Stoke, St David's Park, Flintshire, and Sittingbourne, as the firm sets its sights on constructing 2,000 affordable homes within five years.
Mr Tutte said that the Debut homes in the Midlands - which start at £60,000 - were being snapped up by eager first time buyers.
"Our Rugby scheme, which has 103 properties, has nearly sold out, with 92 people already moved in.
"Castle Vale is also doing very well; we have released around a third of the 130 units there already."
Mr Tutte said Redrow was now looking at further sites at H ilton, near Uttoxeter, Nuneaton, and elsewhere in the Midlands for new Debut developments.
He said: "It is a question of affordability. House prices in many cases have gone beyond what a large number of potential purchasers can pay.
"The Debut homes are targeted at first time buyers who can afford up to £120,000; there is a large amount of people who want to get on the housing ladder. With 400,000 new first time buyers each year, that is a big market."