The international property group, often seen as a barometer for the health of the housing market, said that it had seen higher than expected transactions in the UK prime residential market. It had also seen an increase in transactions in the UK commercial market. This is a relatively recent improvement – in the group’s half yearly results announcement in August, chief executive Jeremy Helsby said that the commercial market was still weak.
Savills has also benefited from the strength of the Asia Pacific region, which represents about 15% of its overall business. The group had been expecting a cooling off, but the region has continued to see strong volumes. Cost savings across its business have been at the higher end of expectations, which has also helped boost performance.
However, the group said it remained cautious about the sustainability of the performance in the UK and Asia Pacific markets in 2010. In particular, the group has been critical about proposals in the pre-budget report targeting bankers’ bonuses. It had been expecting many of the discretionary bonuses to support the prime property market next year.
The shares were up 4.66% to 303.5p in a weak trading morning. Predictably, the shares were hit hard by the economic weakness, but have been stable since July 08 and reached 363p in August. They are still trading at around half their price in early 2007. The shares pay a reasonable dividend yield at 3.1%. The company is well-diversified across different areas of the property market, but the shares remain extremely vulnerable to economic sentiment. With that still fragile, and in spite of this good news, there are ongoing risks.