The slowdown in the housing market has contributed to profits slump at Savills, which saw a 18% decline in revenue from UK residential transactions. 

Overall the group’s pre-tax profits fell by 64% to £55.4m, which Savills said was due to “challenging” property markets worldwide. 

Its full year results show that revenue from the UK residential part of its business stood at £171m at the end of December 2023, down from £208.3m the year before. 

This means underlying profit for this part of the business reduced by 45% to £19.4m. However this still representing an underlying profit margin of 11.4%. 

In the UK, Savills said this downturn reflected the decrease in market volumes due to successive interest rate rises dampening demand, and leading to fewer mortgage approvals. 

Second-hand sales revenues declined by 23%, with the number of exchanges down by the same percentage. In total Savills saw 4,735 second-hand transaction in 2023, down from 6,124 the year before.  

The issues of declining revenues was further exacerbated by the decrease in the average sales value of these transactions. The average transaction in 2023 stood at £1.61m, down 4% on the 2022 figure of £1.68m. In London the average lot size transacted by Savills was down 3% to £2.23m, and by 8% in the regions to £1.27m.

Revenue from the sale of news homes was also down, by 14% year on year, reflecting a decrease of 27% in the number of exchanges, most of which occurred in the regional market. Savills said that London remained more resilient, showing an 8% increase in the average value of new home transactions. 

While Savills saw transactions, revenue and profit reduce in the UK residential market, the group did see growth in some of the less transactional parts of its business. For example its property management business saw revenues increase by 11% and its consultancy business by 4%. 

Group chief executive Mark Ridley says that Savills remain “resilient” in the context of “extremely challenging real estate markets, which saw the lowest levels of transaction volumes for a decade”. 

He adds: “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.”