©Bloomberg

A shift in focus from central London to the commuter belt has delivered record first-half results and a steep dividend increase for FTSE 250 housebuilder Redrow.

The group has stopped building highly priced apartments in central London and shifted its emphasis to the suburbs and the home counties, where demand remains strong, opening new divisions in Kent and Sussex.

Pre-tax profit was up 14 per cent to £104m, slightly exceeding analysts’ expectations, after completions rose 18 per cent to 2,178 in the six months to the end of December.

“We abandoned looking for sites in central London as soon as the writing was on the wall, when the stamp duty changes came in. Those have killed high-end property,” said Steve Morgan, chairman of Redrow.

Redrow’s shares however had dropped more than 5 per cent by midday on Tuesday, despite the positive results. Analysts said the fall might reflect Redrow’s failure to upgrade its guidance for the full year after market expectations it would do so.

It might also be due to concern over Redrow’s existing three central London schemes, said Robin Hardy of Shore Capital.

“That market is weak and could become insensitive to price cuts,” he said.

An overhaul of stamp duty in December 2014 increased the charge for people buying homes costing more than £938,000, while reducing it for transactions below that. The shift helped to damp demand for expensive houses and apartments in the capital.

That has prompted a group of three hedge funds to take up short positions against Berkeley Group, a builder focused on high-end London homes.

Redrow, which builds houses at the cheaper end of the UK market, gained from the Help to Buy scheme that provides government loans for buyers of newly built properties and is supporting 44 per cent of the company’s sales.

The group said it would double its interim dividend to 4p a share, and gave guidance that it would pay out 10p a share during the full financial year — a 67 per cent increase on a year earlier.

The strong results from Redrow — whose share price gained more than any other UK housebuilder in 2015 — add to a string of positive updates from the sector as companies benefit from economic recovery and government support for homebuyers.

Redrow’s operating margin rose to 18.2 per cent from 17 per cent in the six months to the end of December, while the company increased its land bank by more than 4,000 plots to 21,435, and its private order book was up 51 per cent to £655m.

It plans to build 2,900 new homes on a flagship site in the north London suburb of Colindale.

Outside London, the average selling price of Redrow’s properties rose 11 per cent to £300,000. But Mr Morgan said he welcomed moves by the Bank of England to limit mortgage lending to keep the housing market sustainable, as house prices rose almost 10 per cent last year.

“It does us no good whatsoever to see house prices escalating away from reality. The Bank of England has tried to step in and temper those, and we welcome that,” he said.