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Savills and Persimmon gain from UK’s buoyant housing market

Upmarket estate agent Savills reported buoyant demand for expensive UK homes as the UK’s housing boom helps stave off the effect of rising costs.

In a trading update on Tuesday morning, Savills said demand had outstripped expectations and would probably lead to overall profits being “materially ahead of 2019” this year.

The housing market boom has also given a boost to Persimmon and Vistry Group, two of the UK’s largest housebuilders. The companies said sales were continuing to run well above pre-pandemic levels.

Since May last year, when restrictions on buying and selling homes were lifted, the UK property market has been strong. House prices have hit record levels on the back of robust demand from buyers, particularly those seeking more space in which to work from home or outdoor areas.

Average UK house prices surpassed £270,000 for the first time last month, and Persimmon said its current sales rate was about 16 per cent above 2019 levels.

But online estate agent Purplebricks last week warned it was running low on homes to sell, fuelling fears that the market could slow.

“The UK was expected to go quieter in the second half of the year, but [Savills] have come out and said the boom in the prime residential market has lasted longer than they thought,” said Chris Millington, an analyst at Numis.

Savills, Vistry and Persimmon did however point to increased costs, which could eat into profits next year. Rising prices of construction materials and labour thanks to a supply chain crunch were likely to add about 5 per cent to costs this year, warned Persimmon.

Greg Fitzgerald, Vistry’s chief executive, said: “We continue to see strong demand across all our business areas and working in close partnership with our supply chain, we are actively mitigating any supply chain pressures. As a result, we are firmly on track to deliver a significant improvement in profits this year.”

Savills has also benefited in recent months from a higher than expected level of trade in commercial assets such as offices and warehouses, particularly in the UK and Asia. But it said it anticipated a normal trading environment next year and some extra expense as discretionary spending, such as travel costs and events, returned.

On Tuesday morning, Numis upgraded its full-year, pre-tax profit forecasts for Savills to £158m compared with £143m in 2019, but Millington said he expected that to fall back slightly next year as the UK’s residential market cooled.

Shares in Savills increased 2 per cent to 1,449 pence in early trading.

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