Savills (SVS.L), one of the world’s largest property providers, revealed that Brexit uncertainty and the ongoing US-China trade war are hitting its bottom-line.
In the group’s half-year results, for the period ending 30 June, Savills posted lower pretax profit due to UK commercial transactions falling by 7% because investors are uncertain over what’s happening with Brexit. Meanwhile, the US-China trade war has hindered commercial transactions in Asia, making profits fall by 17% in the region.
"Given the lag effect of significant investment in recruitment in the preceding period and facing some challenging transactional market conditions, we had anticipated a slight decline in profits for the first half of 2019,” Mark Ridley, group CEO of Savills, said.
"In many markets, particularly the UK and Hong Kong, political and economic uncertainty has considerably reduced the volume of real estate trading activity in recent months, although occupier demand remains robust. Underlying demand for the secure income qualities of real estate remains high, but these macro uncertainties weigh on investor sentiment and make predictions in respect of near term market activity difficult to determine with accuracy.
“Continued investor demand, restricted supply, and expectations of continued low interest rates suggest that, if political clarity emerges, the medium and long term dynamics of the real estate markets in which we operate remain positive.”
Earlier this year, Savills warned investors that Brexit uncertainty would hurt transaction volumes. Currently, the UK is set to leave the European Union, with or without a deal, on 31 October this year. It is unclear what a deal would look like or even if one will be sealed in time.
Meanwhile, the US and China are engaged in an all-out trade war, leading to a huge amount of global uncertainty over whether a renewed trade deal is possible under current leadership.