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U.K. homebuilder stocks fell sharply Wednesday after market leader Barratt Developments (BTDPY) told investors it had slashed prices for newly built properties in London as it seeks to counter a moribund market for premium property.

The London-listed developer of residential homes delivered what was a broadly positive set of first-half results, but investors took issue with the warning of challenges ahead in the British capital, where Barratt and many other developers have a large exposure.

Barratt stock dropped by nearly 3%, to 470.4 pence, in response to the news. It is down by 25% for the year to date. 

But more broadly, the group said Wednesday that its average sales rate rose to 0.74, from 0.71, during the six months to November 13. Forward-sales were up 4% to £2.65 billion ($3.2 billion) and management said the business is on track to reach gross-margin and return-on-capital-employed targets of 20% and 25% for the year.

Wednesday's report draws to a close the first round of results to emerge from the sector since the U.K. voted to leave the European Union on June 23, which prompted a sharp sell-off in the sector.

Investors have been cautious of real-estate developers for some time, since the government began a program of property sales-tax hikes in 2015, while the threat of political instability may also have helped to deter some overseas investors.

The majority of homebuilder stocks fell Wednesday in London in concert, shedding between 1% and 3.5% of their value, with the London-centric Berkeley Group being the second-largest decliner after Barratt. 

Nonetheless, the bulk of numbers emerging from the industry during the recent reporting period have been positive. Albeit that the darkening clouds over the capital have meant role-reversal has been an enduring theme throughout the period. 

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Once the jewel of all real-estate mogul's crowns, the London market has been hit the hardest by June's vote for Brexit and government property-tax hikes, leading real-estate investor Savills (SVLPF) to predict a 9% fall in prices for 2016.

But demand and price growth across regional markets has remained firm, aided by constricted new-supply and a steady flow of buyers, leaving smaller and more provincial real estate firms as the winners from the recent reporting season.

The spread between 2016 share price losses for sector constituents with exposure to London and those without, confirms the divergent fortunes of the U.K.'s homebuilders.

Industry leaders, and the most exposed to the capital, Barratt, Berkeley Group, Bovis Homes (BVHMF) and Taylor Wimpey (TWODF) have all seen their stocks shed between 20% and 30% for the year-to-date.

This is while regional players such as Crest Nicholson (CRTHF) , Persimmon (PSMMF) , Galliford Try (GALLF) and Redrow have all seen losses limited to the low double digits.

The effect of past tax hikes and the likely fallout for London from the Brexit vote could mean premium city real estate struggles to assail its previous peaks, particularly in the context of the run-away price growth experienced during years leading up to 2016.

But strong market fundamentals for middle-of-the-road housing paint a brighter picture for the regions.

The supply and demand disparity in U.K. housing is well know. The country needs to build 240,000 houses every year to keep pace with population growth. But it has achieved a mere average of only 148,000 over the last six years.

Moreover, with constricted supply on one side of the home price equation and government subsidies for mortgage deposits on the other, a sudden dearth of earnings growth seems unlikely among regional players.