A rush to buy £1m-plus homes in the countryside in the Covid-inspired “race for space” and the warehouse boom at the end of last year have helped the high-end estate agent Savills to significantly upgrade its profit forecasts.
In further evidence that the UK property market is flourishing, the estate agent Winkworth also released figures on Wednesday lifting its profit outlook.
Savills, which handles commercial and residential property deals around the world, said the past nine weeks had been “extraordinarily strong”, particularly in the UK and Asia Pacific. Continental Europe and the Middle East, and North America also improved, more than eliminating the losses of 2020.
The London-based company said a continued exodus of people from cities to buy country houses during the pandemic had boosted its UK business, while the prime central London market also clearly began to improve.
Most of the buyers are British, while international buyers tend to be domiciled in the UK. Other property agencies have reported a return of overseas investors, particularly from Hong Kong.
Savills said: “Currently there is a definite shortage of sale stock, so despite outperformance in 2021, our expectation of a moderation of activity in 2022 remains intact.”
Logistics and retail warehouses in Britain also experienced significant volume increases year-on-year as a surge in online shopping sparked by the pandemic led to booming demand for warehouse space.
However, office leasing remained weak and below historic averages in the majority of markets, Savills said. Demand for office space has largely dried up as many companies, including London banks and insurers, have scaled back their offices, asking staff to work from home because of the pandemic, as per government guidance, for example in the UK.
Savills expects underlying profit before tax for 2021 to be “very significantly” ahead of the top end of its previous range of forecasts.
The estate agent’s expectations for the current year are unchanged, as rising inflation in many markets is pushing wages to the highest rate for many years. The firm expects commercial deals to normalise and activity in some residential markets, particularly in the UK, to slow.
The property analyst Anthony Codling said: “The housing market made hay during lockdown, but the opening up of the economy and relaxing of travel restrictions this year is likely to lead to more normal patterns of activity … therefore, this year hay make be taken out rather than put in Savills barns.”
Winkworth, a franchisor of real estate agencies focused on London, said its 2021 revenues had been better than expected and it would beat the broker Shore Capital’s forecast of annual pre-tax profit of £2.8bn. Sales agreed were 13% higher than in 2020 and 42% above those of 2019, and the rental market, which makes up half its business, was also strong.
Dominic Agace, the Winkworth chief executive, said: “We are conscious of the rising interest rate environment, but the cost of finance remains at a record low and we believe that there is still pent up desire from households to relocate.
“Buyer demand over the end of year break has been reported at record levels and sellers finally seem to be returning to the market. While this may hold back the solid growth in prices of the last two years, it bodes well for the number of transactions and we expect another busy year.”
Vistry Group, the housebuilder formerly known as Bovis, also had a bumper year and expects to have made an adjusted profit before tax of £345m, up from £144m in 2020. It built nearly 2,000 more homes last year than in 2020, the first year of the pandemic, with completions rising 41% to 6,551.