Global property company Savills put out a trading update on Monday and while things are good right now, the company can see storm clouds on the horizon.
Savills, which carries out property services such as valuation, planning consultancy, and landlord and tenant services, had a “strong finish to the year.”
The sale of a significant property in Berlin occurred earlier than expected and, as a result, Savills says 2015 results are set to be ahead of forecasts.
So far so good.
But the company ends the update with a warning (emphasis ours):
In the light of heightened uncertainty over global economic prospects and rising interest rates, we expect a tempering of the strong transaction volumes of recent times in certain markets, notwithstanding that market fundamentals remain sound. Accordingly we retain our original expectations for 2016.
The global property market has been going through a boom over the last few years, with property prices jumping and frenzied activity. Nowhere has that been more obvious that in Britain, where house prices have jumped above pre-crisis levels, buy-to-let activity has gone through the roof, and skyscrapers have sprung up across London at a rate of knots.
But Savills thinks we’re at the tail-end of that boom.
China’s ongoing stock market meltdown, which began last August, has revived fears about just how sustainable its growth and the growth of other emerging market countries really is. That could have repercussions for global growth.
On top of that, the era of easy money looks to be coming to an end with the first US interest rate rise in 9 years last December. Central banks around the world are expected to follow suit.
All of this, Savills says, will make people less willing to invest and buy property.
But it’s worth noting that Savills say “market fundamentals remain sound” — it’s not predicting a price crash, just a slowdown in activity.