Global real estate adviser Savills has flagged a “significant” drop in revenue in the Irish market for the first half of the year, with similar weakness recorded in other European markets including Germany, France and Sweden.
In half-year results on Thursday, the FTSE 250 group reported pretax profits of £6 million (€6.9 million) for the period, down from £50 million in the first half of 2022. This was led by a slide in turnover at its transaction advisory business, which includes commercial and residential property deals, with revenue down by a fifth overall.
In the overall Continental Europe and Middle East part of the business, transactional advisory revenue fell by 12 per cent to £43.2 million.
Savills said a hoped-for rebound in China’s property market has been “somewhat slower” than expected, as parts of the global market struggle to regain momentum after a slump caused by higher borrowing costs.
Group chief executive Mark Ridley told the Financial Times the sector was “always going to have this moment”, when the period of low interest rates came to an end, knocking asset prices and testing investor confidence.
“It’s now upon us, and markets are recalibrating at different speeds,” he said. London and the wider UK market are recovering “quite quickly”, he added, but China’s recovery had been “slower than we hoped”.
All regions had suffered a “material decline in trading volumes” as they adjusted to a rise in borrowing costs, the group said in the earnings statement, as investors “seek greater certainty on the trajectory of interest rates over the next 18 months, something which has become somewhat clearer in recent weeks than for much of the period”.
Shares in the FTSE 250 company were down in London.
The UK-based property group is the latest to report sliding earnings on the back of rising global interest rates, which have led to a drop in real estate deals.
Savills said it was seeing continued strength in Japan and good signals in the UK, but that in China and continental Europe reduced market volumes were now expected through much of the rest of the year.
Analysts at Numis reduced its full-year pretax profits estimate for Savills on the back of the cloudier outlook, trimming its estimate by 11 per cent. They made a “more modest cut” of 9 per cent to its 2024 forecast, based on an expectation that volumes will improve next year.
“Forecasting the timing and extent of the ultimate market recovery remains challenging. However, property markets are repricing quickly,” they said. – Copyright The Financial Times Limited 2023
