Savills plc, the international real estate advisor, has published its results for the half year ended on 30th June 2023.

Revenues only dipped by 2.5 per cent year on year, but adjusted profit before tax tumbled by 72 per cent to £16.3mn.

The UK estate agency part of the business showed results that reflect the worsening market conditions during the first half of 2023 and show a steep decline over the same period of 2022.

Revenues from Savills UK residential business declined by 25% to £71.6m (H1 2022: £95.8m).

To put this into context, it was still Savills third strongest revenue performance in a decade and 25% ahead of the comparable period pre-Covid (2019).

In the second hand agency business, Savills overall transaction volumes exchanged were down 24%.

The average value of London and regional residential property sold by Savills in the period was 4% higher in London at £2.3m (H1 2022: £2.2m) and 8% lower in the regional markets at £1.25m (H1 2022: £1.36m).

Revenue from the sale of New Homes declined 28% on H1 2022. This reflected reduced activity in the lower lot sizes, particularly outside London, which are more mortgage-dependent. The effect of this was partly mitigated by relative strength in the Prime London market which saw a 25% increase in the average lot size transacted.

The Operational Capital Markets business, which advises on the Private Rented Sector (‘PRS’), student and other institutional residential markets, saw a 26% decline in revenue period-on-period as the market began to adapt to the effect of higher interest costs on operating models.

Underlying profits in the UK residential transaction business decreased to £4.7m (H1 2022: £13.6m).

Mark Ridley, Group Chief Executive said in statement:

During 2023, global real estate markets have faced the obvious challenges associated with inflation and the related steep rise in interest rates. Different regions have varied in the pace of their adjustment to current conditions and all have experienced a material decline in trading volumes during that adjustment process.

Market participants, whether investors or occupiers, 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.

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.

We are seeing some positive signs in markets such as the UK and continued strength in certain Asia Pacific markets including Japan; in Continental Europe and mainland China we now expect reduced market volumes to continue through much of the year. In many locations we are carrying very strong capital transaction pipelines awaiting the market conditions for launch. In prolonged uncertain conditions, it remains challenging to predict accurately the timing of individual market recoveries.

Accordingly, our range of expectations for the year as a whole has reduced somewhat. We do, however, continue to anticipate a significant improvement in volumes of activity through the balance of the year, and into 2024.

Savills shares closed last night at 885.0, nearly 11% down on the day’s trading.