DAWN Group has forecast increased profits for its housing business amid signs the Help to Buy scheme has provided a big boost to demand in Scotland, following the company's costly withdrawal from the construction sector.

While the housing market remains challenging, the group said it had seen an increase of around 40% in the weekly number of new home reservations since the Scottish Government started providing support for home buyers under the Help to Buy Scheme on 30 September.

"Probably 40% of reservations are now Help to Buy and I thinks that's probably replicated by other house builders," said finance director Stewart Rough.

But while some market-watchers have expressed concern the Help to Buy shared equity scheme may be inflating another house price bubble in the London area, Mr Rough discounted the chance of one developing in Scotland.

"It's not creating a house price bubble, prices are not flying up. We have got some demand coming back that's not been there for some time but we have not seen significant price increases in Scotland."

Glasgow-based Dawn believes the focus on house building and development will serve it well after the company posted a pre-tax loss of £4.7 million in the year to January. The company incurred £2.7m reorganisation costs arising from its decision to quit construction.

Dawn also booked a £5m charge to reflect a fall in the value of a retail park at Robroyston, which it sold after the end of the financial year.

However, Mr Rough said the decision to quit construction to focus on house building and development activity was correct.

He said it could be some time before any improvement in the economy translates into an increase in construction margins. Dawn concluded these had fallen to unsustainably low levels during the recession.

Majority-owned by Alan Macdonald, the group is confident its housing division will increase profits in the year to January 2014, based on sales and reservations to date.

The division made a £642,000 profit in the year to January after losing £54,000 in the preceding period. It was helped by having a more profitable mix of sites.

Dawn is working on several development projects it believes will generate significant value.

These include the Collegelands office and student housing development on a former goods yard in central Glasgow.

The group renewed its banking facilities with Bank of Scotland in August. It incurred a £1.5m charge to exit an interest rate swap agreement during the year to January 2012. Yesterday, Mr Rough said it remains very happy with Bank of Scotland.

The group made a £3m profit during the year to January on the sale of its share in Public Private Partnership projects including one to build schools in West Lothian.

It incurred £2.3m redundancy costs associated with the closure of the construction business. Around 80 people were made redundant.

Dawn said trading remains strong at Ayr Racecourse. It has a 50% stake in the business.

Dawn paid £1.4m dividends during the year compared with £172,000 in the preceding period.

Turnover fell to £44m in the latest financial year, from £103m.