Estate agents eye shoots of market growth as property sector home sales confidence strengthens
- Savills held its annual guidance after reporting a sharp jump in interim profits
- Fresh Rics survey points to greater optimism among property experts
London-listed estate agents have flagged signs of property market growth as a new industry forecast UK home sales rise to the highest level since 2020.
Savills held its annual guidance after reporting a sharp jump in interim profits amid signs of a global recovery, although major markets were still ‘subdued’, it said.
Pre-tax profits for the first six months of the year surged 48 per cent to £9million, while total revenue jumped 5 per cent to £1.06billion.
Results: Savills saw its pre-tax profits for the first six months of the year surge 48% to £9m, while total revenue jumped 5% to £1.06bn
Mark Ridley, chief executive of Savills, said: ‘Our improved performance in the first half reflects the positive effects of early recovery phases in a number of our markets, as well as the robust and growing earnings provided by our less transactional businesses.
‘Whilst we have seen resilience in prime commercial leasing markets, global capital transaction volumes remain subdued, although activity is recovering in certain markets.’
Savills said major markets, such as Germany, France and greater China were still reporting ‘very low’ transaction volumes as real estate markets adjust to ‘challenging conditions’.
Savills said on Thursday: ‘Our expectations for the current year remain unchanged.’
UK revenue grew by 6 per cent to £435.9million in the first half, when compared to the same point a year ago.
Expectations for a house sales uptick over the next few months have reached their strongest levels since the start of 2020, according to surveyors.
A net balance of 30 per cent of property professionals expect sales to rise over the next three months rather than fall, the Royal Institution of Chartered Surveyors (Rics) said.
This was the most positive sentiment seen since January 2020.
For the year ahead, a net balance of 45 per cent of professionals expect sales to increase rather than decrease.
Rics’ report for July also found that a net balance of 19 per cent of property experts reported house prices falling rather than rising, with particularly weak price readings in East Anglia and Yorkshire and the Humber.
Scotland and Northern Ireland bucked the trend, with surveyors there reporting prices rising overall.
Looking ahead, a net balance of 46 per cent of experts expect property prices to be higher in a year’s time.
The Bank of England base rate was cut from 5.25 per cent to 5 per cent last week, boosting expectations of a pick up in the housing market this autumn.
Rics’ chief economist, Simon Rubinsohn, said: ‘The new government’s focus on boosting housing development alongside the recent quarter point base rate cut does appear to have shifted the mood music in the sales market, with projections for both near and medium activity picking up according to the latest Rics residential market survey.
‘Inevitably, significant challenges lie ahead in delivering on the ambitions around planning reform and it is far from clear that the Bank of England will follow the August move with further easing over the coming months, but, even so, the policy mix is becoming more supportive for the sector.’
In the UK, Savills’ capital transactions remained largely focused on lot sizes below £100million.
It added: ‘£20billion of commercial property investments were traded in the first six months of 2024, 8 per cent lower than the same period in 2023. However, this is 6 per cent higher than the second half of last year, supporting the sentiment that the market is beginning to recover.
‘Prime Residential (high equity component) markets, particularly in the UK, Middle East and the South of France remained relatively buoyant in the first half of 2024, whilst activity in other regions such as Singapore fell during the period.
‘The same is true of new build markets which tend to be more highly dependent on mortgage finance.’
In the US, where Savills is primarily involved in occupier-focused activities, the market ‘saw the return of larger occupier leasing transactions as corporates began to commit to future growth’, Savills said.
Savills announced a 7.1p interim dividend, up from the 6.9p announced a year ago.
Savills shares fell 2.74 per cent or 34.00p to 1,208.00p on Thursday, having risen over 22 per cent in the last year.
Derwent London boosted by acceleration in rental growth
Property investment and development firm Derwent London saw its income grow in the first half, but valuations continued to fall.
The office-focused FTSE 250 group was boosted by an acceleration in rental growth during the period.
Derwent saw its year-on-year gross rental income increase by 1.5 per cent in the six months to 30 June, up from £105.9million to £107.5million.
Derwent said: ‘The financial results for the first half of 2024 reflect an improving background for our brand of high-quality central London offices.’
It added: ‘H1 2024 saw good letting activity across the portfolio, with 27 leases signed totalling £8.8million of rent.’
Paul Williams, chief executive of Derwent, said: ‘The pace of rental growth accelerated in H1 for the best offices in the right locations whilst investment yields have recently stabilised, helping drive greater confidence across the sector.’
The group upped its annual rental guidance to between 3 and 6 per cent. It said: ‘Office yields increasingly attractive as the UK economic and political environment continues to stabilise.’
Derwent shares fell 1.23 per cent or 28.00p to 2,248.00p on Thursday.
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