Housebuilder Wilson Bowden reported an upturn in buyer confidence as it said reservations had picked up significantly.
The Leicester-based group added that cancellation rates were down in the last 11 weeks, running at less than 75 per cent of last year's level and demonstrating a "marked change in buyer confidence".
It said in a trading state-ment ahead of its final results: "Looking ahead, we anticipate entering the new year with a forward order book ahead of our long run average."
Shares were two per cent higher as it also revealed profitability for the second half of its financial year would be slightly higher than in the first six months.
The group's David Wilson Homes arm has an office employing about 100 people just outside Wolverhampton, which turns over 450 homes in the West Midlands a year, a spokesman said.
It is working on projects at sites including Blackheath, Redditch, Bournville, Dudley and Stafford.
Chief executive Ian Robertson said the outlook for Brita in's housing market remained difficult in 2006 - with tough market conditions likely to crimp margins.
He said: "I think it's still going to be a difficult market next year. I don't see any increase in underlying selling prices, having to absorb cost increases both on land and build costs. I would see margins coming again under pressure next year, particularly in the first half."
The company's positive comments and anticipation that the Bank of England may cut interest rates sparked gains in other builders, such as Bovis Homes and Taylor Woodrow, which both rose more than four per cent.
Bridgewell Securities said: "The trading update is more positive than previous statements and confirms the group has posted a reasonable volume performance, supported by a second-half margin that is ahead of the first half.
"We remain buyers of Wilson Bowden on the basis of its discount to the sector average and in our opinion this state-ment confirms the group is well placed for the future."
In September, Wilson Bowden said it did not anticipate the weak UK housing market to recover until next spring after posting a 13 per cent profit decrease in the first half, which the company described as the most difficult trading conditions the market has seen for a decade.
"Cancellation rates dropped, currently running at less than 75 per cent of last year's level, demonstrating a marked change in buyer confidence," it said in a trading update.
Despite overall rise in reservations, overall sales were less than the company had expected as the market recovery remained patchy.
Mr Robertson said: "I'm hoping that the increase in confidence that we've seen in our sites will eventually spread across the north (of England), which will give us a boost because two thirds of our businesses are in the middle and the north."
The company said it was positioned to take full advantage of any improvement in the market, with the increase in outlets and the possibility of modest selling price inflation.
Wilson Bowden said its average house selling prices rose in the second half on changes in product mix, while it maintained tight cost control by cutting overhead to expenses offset higher material costs.
Britain's housing market began a sharp slowdown in mid-2004 following a series of i nterest rate increases between November 2003 and August 2004.
But the market has shown some signs of picking up after the Bank of England eased borrowing costs to 4.5 per cent in August in a bid to revive slower consumer spending and overall economic growth.
House prices rose for the first time since July 2004 in the three months to November. ..SUPL: