UPDATE 2-Bovis Homes sees more demand even as Brexit weighs on sector

* Sees more demand for homes

* Sees higher H1 profit, better annual performance

* Cost cuts offset hit from rising build cost (Adds Brexit context, shares, estimates)

By Samantha Machado and Noor Zainab Hussain

July 9 (Reuters) - Housebuilder Bovis said on Tuesday it expected to post a higher first-half profit after selling more affordable homes at increased prices and saw solid demand for the year, bucking the trend of a wider anaemic real estate market.

Britain's property market has been hurt by a slowdown in European economic growth and prospective home buyers holding out for house prices to fall further because of the country's chaotic attempts to leave the European Union.

While house prices have been rising across the country, prices in London have declined according to various indicators, hit by tax changes and Brexit.

Bovis, which builds traditional homes from two-bedroom starter properties to five-bedroom family homes with a focus on the south of the country, excluding London, said it had started the second half with a strong forward sales position and expected a better performance in 2019.

Shares in the FTSE-250 listed company were 0.2% higher at 1,016 pence ($12.67) at 0723 GMT, after rising as much at 3.5% in early trade. "Market fundamentals remain stable and despite the ongoing uncertainty surrounding Brexit, we continue to see good demand for our new homes across all our operating regions," the company said in a statement.

Bovis has largely focussed on cash generation by selling its non-performing assets and increasing its use of part exchange deals to return to profitability. Such deals allow buyers to trade in their homes as part payment for a new property.

The homebuilder, which recently ended talks with Galliford to buy the builder's residential unit, said it delivered 1,647 completed homes in the six months ended June 30, compared with 1,580 a year earlier.

Bovis, which recently ended talks with Galliford to buy the builder's residential unit, sold 1,031 private units and 616 affordable homes in the first half.

The total average selling prices rose by about 3% to 270,000 pounds.

Kent-based Bovis said reining in costs and margin initiatives offset flat pricing and higher building expenses.

Britain's third-largest homebuilder Taylor Wimpey warned in April that the rising costs of building materials would weigh on profit margins this year. Analysts expect Bovis to post pretax profit of 184.3 million pounds for 2019, according to Refinitiv Eikon IBES. Jefferies analysts said they were comfortable with the top end of their consensus estimates.

"Bovis' operational performance continues to improve with better customer satisfaction and quality helping to drive a better sales rate," Peel Hunt analysts said.

($1 = 0.8022 pounds) (Reporting by Samantha Machado and Noor Zainab Hussain in Bengaluru; Editing by Gopakumar Warrier and Arun Koyyur)