Savills: Loss of Russian buyers won’t hurt ‘ultra-prime’ London market

The boss of Savills claims the loss of hyper wealthy Russian buyers will have no serious impact on London’s high-end ‘ultra-prime’ property market.

Chief executive Mark Ridley said buyers from Russia only comprised a ‘tiny amount’ of the capital’s market, with just 1.4 per cent of central London Russian-owned.

 Mr Ridley said buyers from Russia had not been major players in the market for years, adding that buyers from Asia had become the driving force behind growth and sales in the city’s ultra-pricey market.

Bumper 2021: Savills enjoyed an ‘extraordinarily strong’ trading recovery over the past year

Savills, which is understood to generate around 0.1 per cent of its revenues from Russia, has suspended a franchise agreement with an estate agency based in Moscow in the wake of the Ukraine war. The group does not have operations in Ukraine.

The London-based estate agency group enjoyed an ‘extraordinarily strong’ trading recovery over the past year, raking in bumper profits and sales, its latest results show.

The group’s reported pre-tax profit surged by 120 per cent to £183.1million in the last 12 months, while revenue jumped 23 per cent to £2.15billion.  

Savills hailed strong trading in the final few months of 2021, led by the UK and Asia Pacific regions. 

Both Continental Europe and the Middle East and North American regions recovered to reverse 2020’s losses, delivering better than expected profits for 2021.

Transactional advisory revenues swelled by 34 per cent in recovering markets, while commercial transaction revenues were 35 per cent higher, with positive growth in the UK and Asia Pacific. Residential transaction revenue jumped 31 per cent. 

In the year to the end of December last year, the group’s underlying pre-tax profit increased by 107 per cent to £200.3million, while basic earnings per share rose by 114 per cent to 104.9p.

Lingering pandemic-driven lockdown restrictions across markets allowed the company to slash costs across areas like travel, events and entertainment, bosses said, which helped boost the firm’s underlying profit margin to 9.3 per cent. 

Boss Mark Ridley, said: ‘Savills delivered a record performance in 2021 reflecting the significant recovery in both residential and commercial transactional markets supported by growth in our less transactional investment management, property management and consultancy businesses.

‘The war in Ukraine has shocked the world and, in response, Savills is providing support both through international charities and via our Polish operation, focussing particularly on Ukrainian refugees.’

He added: ‘At this stage it is too early to predict the economic, including longer term inflationary, impact of the Ukrainian crisis on the world’s real estate markets. 

‘Subject to this key uncertainty, we would anticipate real estate transaction volumes and discretionary spend to normalise in the year ahead, alongside the continued recovery of global markets as they emerge from pandemic-related disruptions.

‘The Group has started 2022 in line with our expectations and the strength of our balance sheet supports our growth strategy to pursue further complementary acquisitions and significant recruitment across our global business.’

Russ Mould, investment director at AJ Bell, said: ‘Property services outfit Savills, always a decent proxy for the wider real estate market, impressed as the market emerged from the deep freeze it endured during the pandemic.

‘Less positively the company pointed to considerable uncertainty in the coming 12 months. Even without rampant inflation, conflict and an increase in discretionary costs Savills expects volumes to normalise suggesting 2022 is likely to be a fair bit trickier than 2021.’

Savills shares have jumped sharply today, and were up 3.51 per cent or 40.00p to 1,180.00p just before 1pm. The group’s share price has risen over 12 per cent in the past year. 

Analysts at Numis, said: ‘At this early stage in the year we are leaving forecasts unchanged, which point to a moderation in profits as transactional markets normalise and discretionary spend returns. 

‘However, even after accounting for this Savills is trading on sub 13x PE for FY22, compared to its international peer CBRE on 16x consensus earnings. We therefore move from ADD to BUY and think that Savills geographic and end-market diversification is not adequately reflected in the current rating.’

This post first appeared on Dailymail.co.uk