High-end estate agent Savills blames interest rates for profit crash
Commercial and residential estate agent Savills made a loss during the full year as rising interest rates hindered activity.
This morning, the firm, which is publicly listed, said profit before tax was down 64 per cent to £55m, while group revenue slid three per cent to £2.2bn.
The group announced a final dividend per share of 20.8p, up four per cent taking the payout for the year to 22.8p, down 36 per cent.
The board blamed the weak performance on a significant rise in interest rates and “uncertainties” over the future role of offices and the valuation of existing stock in the era of sustainability.
London and the wider UK has been facing a shortfall in office space because so many older buildings do not meet energy efficiency targets.
Tenants have become increasingly picky and tend to favour buildings that are best in class but have less space due to work-from-home practices.
Meanwhile, its residential arm was bruised by higher mortgage rates and buyers struggling with affordability.
UK residential transactional revenue decreased by 18 per cent to £171.0m.
Savills said this reflected the “decrease in market volumes with successive interest rate rises and the consequent fall in mortgage approvals dampening demand.”
Mark Ridley, group chief executive of Savills plc, said: “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.”
He added: “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.”