International property services company, Savills, said the effect of the credit squeeze on property was spreading across Europe and even into Asia, in its trading update for the half year ended 30 June 2008 published on Tuesday. The update showed business in the UK and US Commercial Capital Markets was down on the comparable period in 2007. According to the statement these trading conditions have now spread to many parts of Europe where the number of transactions is declining due to financing difficulties.
International property services company, Savills, said the effect of the credit squeeze on property was spreading across Europe and even into Asia, in its trading update for the half year ended 30 June 2008 published on Tuesday. The update showed business in the UK and US Commercial Capital Markets was down on the comparable period in 2007. According to the statement these trading conditions have now spread to many parts of Europe where the number of transactions is declining due to financing difficulties.
The statement added that while transactional business is more resilient in Asia, the developed Asia Pacific countries, such as Australia and Japan were beginning to feel the effect of the financial crisis and economic uncertainty, while Hong Kong and Singapore more stable. Meanwhile demand for Consultancy, Property Management and Fund Management services, although not immune to the impact of the credit squeeze, remained good.
Following the gloom trading Jeremy Helsby, chief executive, said that the tough trading conditions 'make predictions of full-year performance very difficult.' Helsby added that there was no sign of an improvement in confidence which was necessary for a recovery. This prompted the group's broker, ABN Amro, to cut its profit forecast for the year from £62mln to £52mln, which compares with a pre-tax profit in 2007 of £85.5mln.
There were, however, some positive signs in the update. Helsby said the UK commercial side had largely taken the pain now and in London deals were being done in the investment market. Although prime yields in UK commercial property had stabilised, secondary yields were still softening. Tenant demand had been 'fairly resilient' but rental growth was subdued as vacancy rates in London were not expected to rise by much.
The update also said that Savills' property management business performed well, but its consultancy activities were beginning to be affected, particularly in Europe and in its IPO work. The fund management arm, Cordea Savills, was 'consolidating its position' after some years of expansion, and no new funds were launched in the half year.
