Average prices of homes drop as demand for city-centre development falls.
Redrow says that a combination of lower margins and a drop in average selling price will lead to a fall in profit for the first half of the 2005/2006 financial year.
The group said profits in the year to June 2006 would be more more weighted towards the second half.
In the six months to 31 December 2005 the housebuilder's number of completions dipped slightly to 2,077 from 2,111 for the same period last year.
A fall in completions in its 'In the City' developments - down 294 units to just 152 sales - was mitigated by a 9.3% increase in sales in its Signature schemes, which went up to 1,820.
The group completed 105 legal sales from its first two Debut developments, and says it has successfully launched its third Debut scheme at Castle Vale in Birmingham. These sales of lower-priced units contributed to a lower average selling price.
Redrow went into the New Year with a land bank of 18,400 plots, and says it is well placed to focus on medium-term opportunities. Despite describing the first six months of the financial year as "challenging and competitive" with transactions market-wide expected to be the lowest for 30 years, the group says its own lead indicators are encouraging.
It added that consumer confidence would be a key factor in determining the strength of the housing market in spring 2006.
The announcement from Redrow sparked a share price fall of 9p to 526p.
