Declining transaction volumes dampen results for Savills

 

Declining transaction volumes, reduced revenue, and lower profitability driven by interest rate changes and mortgage volatility took the shine off Savills results this morning.

Revenue from residential transactions in the UK decreased by 18% compared to the previous year, totalling £171 million, down from £208.3 million in 2022.

HOME SALES

Revenue from home sales decreased by 23%, primarily due to a 23% reduction in the number of exchanges, which dropped to 4,735 from 6,124 in 2022.

Meanwhile, there was a 4% decrease in the average sales value, falling to £1.61 million from £1.68 million in 2022.

In London, the average lot size transacted by Savills decreased by 3% to £2.23 million, while in regional areas, it decreased by 8% to £1.27 million.

Both regional UK markets and central London experienced significant declines in volumes, in line with expectations.

Revenue from the sale of new homes decreased by 24% year-on-year, primarily due to a 27% decrease in the number of exchanges.

Underlying profit decreased by 45% to £19.4 million compared to £35.1 million in 2022, reflecting the reduction in revenue. This resulted in an underlying profit margin of 11.4%, down from 16.9% in 2022.

GROUP REVENUE

Group revenue dropped by 3% to £2.2 billion down from £2.3 billion the year before but revenues grew 7% to £1.5 billion as consultancy and property management stood firm, growing revenue by 4% and 11% respectively.

Global market conditions remained ‘extremely subdued for longer than anticipated.”

Savills said the group’s transactional business experienced a 17% drop in revenue during the year as global market conditions remained ‘extremely subdued for longer than anticipated’ at the start of 2023.

Mark Ridley (main picture), Group Chief Executive of Savills plc, said: “Savills resilient performance in 2023 highlights the diversity and strength of our global business.

“In the context of extremely challenging real estate markets, which saw the lowest levels of transaction volumes for a decade, our less transactional businesses have provided a solid platform for the Group with a resilient and growing earnings stream.”

CONDITIONS REMAIN UNCERTAIN

And he adds: “Current economic and geopolitical conditions remain uncertain and although we expect this to continue for some time, most markets appear to be past the moment of peak uncertainty.

“There are some early signs of underlying market improvements, which should set the course for a broader recovery during the second half of the year and into 2025.”

Stacey Cartwright, Savills Chair, says: “Throughout the year, real estate markets across the globe were challenged by significantly increased interest rates, geopolitical events and, on a more asset-specific level, uncertainties over the future role of offices and the valuation of existing stock in the era of sustainability.

“These factors, together with certain location-specific issues, significantly reduced capital transaction volumes in global markets to their lowest levels for a decade.

“In addition, economic uncertainty led to delays in corporate occupiers committing to new leasing activity in many markets.”