Savills’ share price tumbles as estate agent warns over health of housing market
Savills’ share price has plummeted after the estate agent blamed “obvious challenges” in the housing market for slumping revenues in the first half of the year.
As rising mortgage rates knocked buyer confidence, the real estate advisor said group profit before tax fell to a weak £6.0m in the first six months of the year compared to £50.4m in the same period last year.
Shares in the estate agent tumbled to trade down almost 10 per cent after the negative update.
Savills, which is known for its yellow for sale signs, also said that given steep rises in interest rates, its residential business declined by 25 per cent to £71.6m, down from £95.8m.
Revenue from the sale of new homes also declined 28 per cent compared to last year.
“This reflected reduced activity in the lower lot sizes, particularly outside London, which are more mortgage-dependent,” Savills said.
However, the business said that the effect of this was partly mitigated by “relative strength” in London’s prime market, which saw a 25 per cent increase in the average lot size transacted.
Group revenue also fell 2.5 per cent to £1.01bn and underlying profits sank to £16.3m, down from £59.2m.
“During 2023, global real estate markets have faced the obvious challenges associated with inflation and the related steep rise in interest rates,” Mark Ridley, group chief executive of Savills, said.
“Savills has weathered both the inflationary cost conditions and reduced transaction volumes well, increasing market share and, supported by our strong balance sheet, continuing to undertake selective business development activities to further the group’s long term growth strategy,” he added.