The housing market slump is deepening with a Kent-based builder reporting a steep fall in sales since the turn of the year.

Bovis Homes Group, based in New Ash Green, said reservation levels since January 1 were down by nearly a third - from 1,979 to 1,382 - on the same time a year ago.

It implied that prices in some area would have to be reduced and warned shareholders to expect reduced profits.

In a gloomy interim management statement ahead of tomorrow’s annual meeting, Bovis blamed the mortgage squeeze - loans down 46 per cent on the same time a year ago - and consumer caution.

It said conditions in the housing market had deteriorated sharply. "Well publicised negative developments in the mortgage market have continued apace, with a large number of mortgage products being withdrawn, mortgage interest rates and fees being increased and more substantial deposits being required by a range of different lenders.

"This, together with a general reduction in the quantum of mortgage finance availability, has contributed to a much reduced volume of mortgages being approved."

Bovis warned that if the difficult conditions persisted, with a similar reduction in reservations and increase in cancellations, the group would not be able to meet its forecasts.

It expected financial results for the first half of the year to June 30 to be significantly lower than anticipated. It made the rest of the year difficult to predict and the timing of any market improvement was uncertain. Bovis said house prices would be "adjusted" to reflect local market conditions.

The company added: "Whilst acknowledging that short term profits are adversely affected by current market conditions, the Group’s long term investment strategy in land for housebuilding will assist the Group in delivering sustained good medium and long term performance."

There was still a shortage of houses in the UK and Bovis was "well-positioned to benefit from improved housing market conditions when they arrive."

Despite the gloomy conditions, Bovis said it remained committed to raising the dividend to shareholders from 35p to 40p for the calendar year.