Charles Gallagher, chairman of homebuilder Abbey, said the company had made a good start to the current financial year, but warned that any rises in interest rates or further economic downturn could hurt business.

Addressing shareholders at the group's annual meeting in Dublin yesterday, Mr Gallagher said that turnover since the start of May was running moderately ahead of the prior year.

In the year to the end of April 2007, Abbey reported revenue of €192.2 million, a decline of 6 per cent on the prior year, while pretax profits were down 3 per cent, at €45.4 million.

In the current financial year Mr Gallagher said the company plans to complete 250 homes in Ireland, compared with 220 last year, and 500 in the UK, up from 457.

He added that the group is on track to meet its targets.

Mr Gallagher's comments come amid a raft of negative news on the housing market.

Fewer new homes are expected to be completed this year and figures released yesterday show the average house price in the Republic has fallen by almost €6,000 over the past 12 months.

Despite this, Mr Gallagher insists there is still demand for new homes, saying that the company has even increased prices on some of its developments. He did say, however, that prices have been reduced on others.

"There is still plenty of demand and there is no reason to believe the market will not to pick up," he said.

Mr Gallagher warned that any rise in interest rates, particularly in the UK would have a negative effect on the housing market. The European Central Bank and the Bank of England left rates on hold yesterday.

In the agm statement Abbey also said it has achieved 16 sales at an average of €200,000 at its first project in Prague.

Shares in Abbey rose 4.9 per cent, to €7.55, although volume was very light.