In a trading update that was released on Monday, global property company Savills stated that while business is good right now, things could be murkier in the near future. Savills conducts various property services, such as valuation, planning and consultancy.
The company finished 2015 on a strong note, thanks to a significant property sale in Berlin that occurred earlier than expected. Despite the questionable future, Savills says that its 2015 results should be ahead of its earlier forecasts. But things might not be so good for 2016.
With heightened uncertainty regarding the global economy and rising interest rates, the company is expecting a disturbance in the strong recent transaction volumes. The predicted slowdown should affect some markets more than others. However, the company has not yet changed its expectations for 2016.
Over the past few years, the global property market has been booming. Property prices have been steadily increasing, and there have been a large amount of market activity. This has been particularly true in Great Britain, where housing prices have been very high as of late and sales have been flourishing. Newly-built skyscrapers in London have certainly helped matters. That being said, Savills thinks this boom is about to conclude.
With the meltdown in Chinese markets, there will certainly be global repercussions. There is widespread fear that the growth in the property industry is not sustainable. It is questioned whether or not new markets can emerge under these conditions. Additionally, the price of oil is continuing to decline rapidly, suggesting more market downturns.
The decisions from central banks aren’t expected to help matters for Savills. In December, the Federal Reserve in the United States increased the American interest rate for the first time in nine years. Other central banks throughout the world are expected to take similar actions in the near future. This will make it harder for people to invest in new properties.
However, Savills also says that market fundamentals are still solid. Ultimately, Savills does not believe there will be a total market crash, but a slowdown is very possible.