The move sent shares in the company, which sells residential properties in London and elsewhere in the UK, tumbling as much as 14 percent to their lowest level since November 2016.
Rising wages in the UK construction sector due to a tight supply of skilled labour, along with higher building material costs, have hurt margins, Chief Executive Patrick Bergin told Reuters.
"If you are not getting sufficient price inflation to cover that cost inflation, then margins are going to degrade and that's what we are seeing here," he said after the company released a six-month trading update.
Crest, which has a strong exposure to higher priced properties, said home sales at higher price points would continue to be affected by a slow second-hand market and were likely to restrain overall price growth in the near term.
Bergin said that while the government's help-to-buy scheme was trumping any consumer anxieties at cheaper price points, consumer confidence was being hit at higher prices points where spending is discretionary.
Uncertainty about how Britain's departure from the European Union will affect the property market was also deterring some potential buyers.
"Now that we are one year pre-Brexit, it is entirely plausible that due to the combination of uncertainties, some buyers may think why not wait another year and see how life is going to look," Bergin added.
The Royal Institution of Chartered Surveyors' house price balance said house prices fell in April to their lowest level since 2012 in another sign of soft consumer demand.
Mortgage lender Halifax reported a particularly sharp drop in house prices last month.
"The experience of generally flat pricing against a backdrop of continuing build cost inflation at 3-4 percent will mean that operating margins for the full year are expected to be around 18 percent," Crest Nicholson said in a statement.
The company had previously forecast operating margins of 18-20 percent.
Crest Nicholson's share price initially fell 14 percent. It was down 12.6 percent at 431.6 pence by 0841 GMT and has now fallen 21 percent this year.
"Volumes in the new build housing market continue to be robust and Crest Nicholson remains well positioned to grow volumes and deliver the homes that the UK needs," CEO Bergin said in the company's statement.
Crest, which operates in London, southern and eastern England and south Wales, said average selling prices of its properties rose 5 percent to 439,000 pounds in the first half of its current fiscal year and this level is expected to represent a peak for the business.
The company is due to announce half-year results on June 12.
(Reporting by Radhika Rukmangadhan in Bengaluru; Editing by Gopakumar Warrier and Susan Fenton)
By Radhika Rukmangadhan