The group, owner of the Bairstow Eves chain of estate agents and property website Rightmove.com, said pre-tax profits for the six months to June sank to �21.9m from �35.8m a year earlier.

Countrywide blamed "difficult" property market conditions, saying the housing market had stalled as the Iraq war hit housebuyers' confidence, threatening a period of economic instability.

Countrywide also said first time buyers were becoming scarce, which meant that deals were taking longer to complete.

The number of completed property transactions fell 16% during the first half of the year to just over 37,000, while the number of mortgages arranged rose 8% to nearly 25,000.

Rebound

But Countrywide added that the swift end to the Iraq conflict and falling interest rates have reinvigorated the housing market at the start of the second half of the year.

Chairman Christopher Sporborg said: "Difficult trading conditions earlier this year focused our attention on cost reduction, particularly in our house agency division.

"Fortunately, the market has shown some signs of gentle recovery recently, encouraged, no doubt, by the end of the war in Iraq and record low mortgage rates."

He added: "Volumes were down and we are a volume business. But the July figures were excellent."

"For the rest of the year, we expect activity to pick up despite a possible moderating of average house price increases and look forward to improved profitability."