Housebuilder Redrow has reported an increase in cancellation rates

A leading housebuilder has painted a bleak picture of the property market after revealing a "marked increase" in cancellation rates since Easter.

Redrow said trading conditions had deteriorated to an even greater extent than forecast in late February, with legal completions in the current financial year now likely to be 10% lower than estimates made at that time.

The UK's seventh largest housebuilder by market value said cancellations had been running at just over 20%, but added there had been a pick up since Easter as nerves over the health of the property market intensified.

It added in a trading update: "It is becoming increasingly difficult to predict accurately reservation and cancellation rates."

Redrow said net reservations so far this calendar year were nearly 50% below the level seen at the same stage a year ago.

It said the downturn partly reflected its cautious approach to the use of part exchange and shared equity or deferred consideration incentives.

Redrow said it had responded to the tougher climate through the management of site and office overheads, including some headcount reductions. It is also taking a "very selective approach" to land transactions until the outlook for the housing market becomes clearer.

It said: "Once the market returns to more normal levels of activity, we anticipate there will be pent up demand and a shortage of outlets to meet the Government's aspirations for delivery of new homes. This should be a positive for the industry in the future."

Redrow was recently the subject of speculation about a possible £1.3 billion merger with larger rival Bellway. While Bellway is the larger firm by market value, Redrow is thought to boast a bigger holding of future plots - estimated at around 25,700.

Flintshire-based Redrow's pre-tax profits from continuing operations for the six months to December 31 dived to £35.8 million from £54.7 million. Total house sales for the period were 2,111, down 4.7% year-on-year.