Crest Nicholson has cut its profit outlook. The housebuilder now expects full-year adjusted profit before tax to come in at around £50m, down almost a third from its previous guidance for £73.7m.

Crest Nicholson said transaction levels across the industry have weakened further, particularly in recent weeks.

As Interactive Investor head of investment Victoria Scholar explains the housebuilder has struggled with worsening trading conditions over the summer amid the backdrop of high inflation and rising interest rates.

As a result, Crest Nicholson expects to reduce future land activity significantly.

“With mortgage borrowing becoming increasingly expensive, the housing market is feeling the squeeze, weighing on the housebuilder sector, particularly given that strong wage growth and core inflation means that interest rates are expected to remain elevated for some time and these issues are here to stay.

A J Bell investment director Russ Mould says weak house price data is hardly a surprise. “Economic uncertainty is elevated, mortgage costs have gone through the roof and the Help to Buy scheme has come to an end. However, Crest Nicholson’s profit warning has laid bare the scale of the impact of a housing slowdown on the housebuilding sector”.

He adds: “Sales of new homes have plunged alarmingly and, while not all developers in the space are created equal, the news, allied to Rightmove’s latest reading on the property market, has had a knock-on effect on share prices in the rest of the sector this morning.”

Mould suggests the £7,000 drop in the average asking price observed by Rightmove in the last month, allied to a big drop in transaction volumes,  is the kind of statistic to make estate agents distinctly uneasy.

“The scale of Crest Nicholson’s warning may come as a shock to investors given it reported its first half results just a couple of months ago and this hints at the speed and scale of the deterioration in the market.”