Bovis, the builder of upmarket homes, has reported that demand for its properties has all but dried up and that average sale prices are stagnating.

Analysts said that Bovis would be forced to scrap its declared target of raising profits by 10 per cent for 2007 as a result of a sudden slump in confidence among homebuyers.

A glum trading update from the FTSE 250 builder came as Alistair Darling, the Chancellor, pledged to relieve the crisis in affordable housing through measures including a shake-up in the country’s mortgage market.

Mr Darling said he is planning to boost the supply of long-term fixed-rate home loans for periods of up to 25 years. The move follows concerns that lenders are only offering shorter-term fixed rates so they can keep charging high arrangement fees.

The Chancellor also pledged to simplify the planning system and add to the supply of housing – even in the face of protest from the green lobby.

“Planning is a sensitive issue. I will yield to no one in my determination to protect our heritage but if we don’t increase the supply of houses the problem will get worse,” he said.

The lack of affordable housing, he said, posed a risk to economic stability.

Bovis’s update sent its share price tumbling by more than 8 per cent. Shares were 74½p lower at 846p as a wider sell-off hit listed property companies, including Redrow and Persimmon. The market values of both fell by at least 4 per cent.

Bovis said that its ability to deliver profits growth over the full year was dependent on the key summer and autumn selling period.

The announcement came two weeks after its rivals Taylor Woodrow and George Wimpey had said that property market conditions would be “more challenging” but less than two months after Bovis had boasted at its annual shareholder meeting that reservations of properties had risen by 9 per cent.

Malcolm Harris, Bovis’s chief executive, said that five successive rises in interest rates and the end of two-year discount mortgage deals had taken the steam out of demand among homebuyers.

He said that visits to Bovis properties had fallen in the past six weeks, running 20 per cent lower on a like-for-like basis than at the same point last year. The East Midlands was bearing the brunt of the slump.

“We are not finding that price is the issue; it’s about confidence. There is now much more caution with consumers and site visitors,” Mr Harris said. “The next two or three months are going to be quite critical to the level of expansion we can achieve over last year’s sales.” Bovis’s actual sales rate was “only a little above last year”, he said.

Bovis has several developments in southern and southwest England that are poised to come on to the market and this should help to stimulate demand, Mr Harris said. He said that Bovis was working with financial providers to offer assistance to first-time buyers trying to get on to the property ladder.

Chris Millington, an analyst at Bridgewell Securities, the stockbroker, described yesterday’s trading update as “slightly disappointing”, given its suggestion of flat profits. He expected to cut his forecast estimates by between 7 per cent and 10 per cent.

Keith Bowman, an analyst at Hargreaves Lansdown, said: “Although management appears confident of managing through increased head-winds, the degree of build volume expansion the group might enjoy is being left firmly at the foot of consumer confidence.”

Bovis’s property market dampener comes after a string of surveys highlighting the way in which house prices have come off the boil over the past three months.

Last week, Halifax reported that prices rose by only 0.4 per cent in June. In May, they increased by 0.3 per cent. Nationwide predicts that house prices could rise by as little as 5 per cent for the year overall.

Numbers

UK house completions 2006*

— Taylor Wimpey 21,910

— Barratt Developments 19,702

— Persimmon 16,701

— Bellway 7,117

— Redrow 4,735

— Bovis 3,123

— Crest Nicholson 2,946

— Berkeley Group 2,852

*by company financial year