Housing Market Slowdown Contributes to Profits Slump at Savills: Full Year Results Analysis
The global real estate market has been facing challenges, and Savills, a leading real estate services provider, is feeling the impact. The slowdown in the housing market has contributed to a significant decline in profits for the company, with an 18% decrease in revenue from UK residential transactions.
Savills reported a 64% decrease in pre-tax profits, falling to £55.4m, as “challenging” property markets worldwide affected their business. In the UK, revenue from residential transactions dropped to £171m, down from £208.3m the previous year, leading to a 45% reduction in underlying profit to £19.4m.
The decline in the UK housing market can be attributed to several factors, including reduced market volumes due to successive interest rate rises dampening demand and leading to fewer mortgage approvals. Second-hand sales revenues decreased by 23%, with the number of exchanges also falling by the same percentage.
Furthermore, the average sales value of transactions decreased in 2023, with London seeing a 3% decrease in average lot size transacted by Savills. Revenue from the sale of new homes also dropped by 14% year on year, with most decreases occurring in the regional market, although London remained relatively resilient.
Despite these challenges, Savills saw growth in other parts of its business, such as a revenue increase of 11% in its property management business and 4% in its consultancy business. Group chief executive Mark Ridley remains optimistic about the future, stating that Savills is “resilient” in the face of extremely challenging real estate markets.
Ridley also mentioned that although current economic and geopolitical conditions are uncertain, there are early signs of market improvements, setting the stage for a broader recovery in the second half of the year and into 2025. With market conditions expected to improve, Savills is hopeful for a turnaround in their profits and performance in the coming years.
