The British government last year announced initiatives worth billions of pounds to try to increase housebuilding after previous administrations failed to ensure supply kept up with demand, pricing many people out of the market.

Barratt, which said pre-tax profit is expected to rise by 7 percent to 315 million pounds in the six months to the end of December, built 6 percent fewer homes in the period despite government efforts to support the industry.

Shares in the company fell 2 percent to 490 pence by 0855 GMT.

Barratt, which built 17,319 homes in its financial year to June 2016, said that figure could fall in 2016-17 after a drop of more than 50 percent in the number of homes it built in the capital over the past six months.

"In London in the last two or three years... it's become an increasingly competitive land market," Chief Executive David Thomas told Reuters.

"There's been a lot of purchasers and that's been a key driver as to why we've not been able to buy land," he said, adding that has filtered through into the number of homes the firm has built, particularly in the city centre.

When asked whether the firm would build more homes overall this year across the country, Thomas said: "It's going to be pretty marginal. Probably flat or possibly slightly down."

The firm has also had to discount the price of some of its top-end London homes by up to 10 percent following a property tax rise and the Brexit vote which have both hit demand for properties in the capital's priciest postcodes.

(Reporting by Costas Pitas; editing by Sarah Young/Keith Weir)