Macro Monday 37 Continued - The RICS & Savills Plc
Chart Comparison ~ The RICS & Savills Plc
(extension to this mornings Macro Monday 37)
After sharing todays Macro Monday I couldn’t help be notice some similarities in between these charts.
RICS
The Royal Institute of Chartered Surveyors (RICS) House Price Balance is a monthly survey that indicates whether more or less surveyors expect housing prices to rise or fall in the U.K. housing market. For more on the RICS see the below Macro Monday Post shared earlier today.
Savills plc
Savills plc primarily operates as a global real estate advisory firm, offering a wide range of services including property sales, leasing, valuation, advisory, and investment management. While it does include auction services as part of its portfolio, auctions may not be the primary focus of its business compared to specialized auction houses.
Before we review the chart its important to recognize that Savills operates globally and provides real estate services in various countries and regions around the world, including the United Kingdom. While the company may generate a significant portion of its revenue from the UK market, the exact percentage of house sales in the UK versus other regions would vary depending on factors such as market conditions, business strategies, and client demand.
The below slide from their July 2023 report gives a nice overview of their types of business transactions and geographical spread
All of the above is important because if we are going to compare these charts we need to be aware that there are a lot of nuances to the Savills price and whilst it is a good indicator of the UK Property market and the performance of the UK segment of the company itself, its business and operations are far more broadly spread and have a corporate & services edge. One could argue that the defensive aspects of the business are consumer needs based (property management), thus not necessarily discretionary or market price driven. The riskier end of business actually seems to be in residential sales and holds a much smaller weighting, likely meaning it impacts the stock price a lot less (which the chart later appears to confirm).
This is very different to the likes of the data from the RICS survey which is a direct representation of the UK housing market prices in isolation. Also, Savills plc is a stock thus investor sentiment and many other variables like business performance and business structural changes impact the price on the chart.
RICS vs Savills plc
First lets look at the Savills plc chart in isolation. We can see that there is a long term diagonal parallel channel (blue) and the recently price fell out of this channel suggesting that this could be the beginning of a long term trend change.
We appear to be moving through a parallel horizonal channel at present and typically, when you break out of such a box or channel there is an increased probability to continue in the direction of the break up or down. This could also be considered a Darvas Box, it that were the case, Darvas box price movements typically move in the same direction from entry which in this case would be down.
In support of this chart not breaking down we are above the 200 day SMA at present (red line) and we have strong historic price support and volume support (red box) under price at present. This area would be hard to break through but if it was it would be confirmation of a trend change.
RICS vs Savills plc Chart
You can clearly see that the RICS and Savills plc on the chart have moved in unison in the past.
Lower highs on the RICS (red arrows) were a great indicators in 2007 and 2010 of a subsequent declines in the Savills plc stock (and the UK housing market).
However in 2013 a deviation appears, where by lower lows on the RICS did not impact Savills plc like it previously had in the past. From 2013 a large divergence into a megaphone pattern emerges as the RICS makes a series of lower lows and Savills makes a series of higher lows and higher highs.
Why this is happening is open to interpretation but one would imagine that Savills plc have found ways to diversify their business and based on the RICS downward volatile trend, the performance of Savills plc is very impressive. The UK housing market has clearly been volatile in recent years however the company has weathered this volatility and is deviating away from it in an upward trajectory. The companies focus on real estate services means money during market swings and their management fee business can act as a float throughout
When I first started this comparison I presumed the RICS and Savills plc combined could really help inform us of what is happening in the UK Property, however having dug a little deeper, it is clear to me that the business model and the price of Savills is not directly correlated to the UK property market prices, rather it is a diversified business model which leans on property management transactions, Corporate Real Estate (CRE), property services and has a wider geographic reach. Savills plc may be better suited as a general chart to review for the general global CRE market, property services and management market.
RICS on the other hand can continue to help us interpret housing market prices in the UK in a more direct way. I have to admire the progression of the Savills Company away from the market volatility on the RICS and towards sustainable growth, purely from a chart observation standpoint.
Unfortunately I cannot complete a comparison of large residential auctioneers in then UK like Alsop's, Auction House UK and SDL Auctions as they are not public.
I will keep a look out for any charts that could use to help guide us in the UK property market.
PUKA
(extension to this mornings Macro Monday 37)
After sharing todays Macro Monday I couldn’t help be notice some similarities in between these charts.
RICS
The Royal Institute of Chartered Surveyors (RICS) House Price Balance is a monthly survey that indicates whether more or less surveyors expect housing prices to rise or fall in the U.K. housing market. For more on the RICS see the below Macro Monday Post shared earlier today.
Savills plc
Savills plc primarily operates as a global real estate advisory firm, offering a wide range of services including property sales, leasing, valuation, advisory, and investment management. While it does include auction services as part of its portfolio, auctions may not be the primary focus of its business compared to specialized auction houses.
Before we review the chart its important to recognize that Savills operates globally and provides real estate services in various countries and regions around the world, including the United Kingdom. While the company may generate a significant portion of its revenue from the UK market, the exact percentage of house sales in the UK versus other regions would vary depending on factors such as market conditions, business strategies, and client demand.
The below slide from their July 2023 report gives a nice overview of their types of business transactions and geographical spread
All of the above is important because if we are going to compare these charts we need to be aware that there are a lot of nuances to the Savills price and whilst it is a good indicator of the UK Property market and the performance of the UK segment of the company itself, its business and operations are far more broadly spread and have a corporate & services edge. One could argue that the defensive aspects of the business are consumer needs based (property management), thus not necessarily discretionary or market price driven. The riskier end of business actually seems to be in residential sales and holds a much smaller weighting, likely meaning it impacts the stock price a lot less (which the chart later appears to confirm).
This is very different to the likes of the data from the RICS survey which is a direct representation of the UK housing market prices in isolation. Also, Savills plc is a stock thus investor sentiment and many other variables like business performance and business structural changes impact the price on the chart.
RICS vs Savills plc
First lets look at the Savills plc chart in isolation. We can see that there is a long term diagonal parallel channel (blue) and the recently price fell out of this channel suggesting that this could be the beginning of a long term trend change.
We appear to be moving through a parallel horizonal channel at present and typically, when you break out of such a box or channel there is an increased probability to continue in the direction of the break up or down. This could also be considered a Darvas Box, it that were the case, Darvas box price movements typically move in the same direction from entry which in this case would be down.
In support of this chart not breaking down we are above the 200 day SMA at present (red line) and we have strong historic price support and volume support (red box) under price at present. This area would be hard to break through but if it was it would be confirmation of a trend change.
RICS vs Savills plc Chart
You can clearly see that the RICS and Savills plc on the chart have moved in unison in the past.
Lower highs on the RICS (red arrows) were a great indicators in 2007 and 2010 of a subsequent declines in the Savills plc stock (and the UK housing market).
However in 2013 a deviation appears, where by lower lows on the RICS did not impact Savills plc like it previously had in the past. From 2013 a large divergence into a megaphone pattern emerges as the RICS makes a series of lower lows and Savills makes a series of higher lows and higher highs.
Why this is happening is open to interpretation but one would imagine that Savills plc have found ways to diversify their business and based on the RICS downward volatile trend, the performance of Savills plc is very impressive. The UK housing market has clearly been volatile in recent years however the company has weathered this volatility and is deviating away from it in an upward trajectory. The companies focus on real estate services means money during market swings and their management fee business can act as a float throughout
When I first started this comparison I presumed the RICS and Savills plc combined could really help inform us of what is happening in the UK Property, however having dug a little deeper, it is clear to me that the business model and the price of Savills is not directly correlated to the UK property market prices, rather it is a diversified business model which leans on property management transactions, Corporate Real Estate (CRE), property services and has a wider geographic reach. Savills plc may be better suited as a general chart to review for the general global CRE market, property services and management market.
RICS on the other hand can continue to help us interpret housing market prices in the UK in a more direct way. I have to admire the progression of the Savills Company away from the market volatility on the RICS and towards sustainable growth, purely from a chart observation standpoint.
Unfortunately I cannot complete a comparison of large residential auctioneers in then UK like Alsop's, Auction House UK and SDL Auctions as they are not public.
I will keep a look out for any charts that could use to help guide us in the UK property market.
PUKA
