Financial squeeze now affecting many European markets, according to property consultants

The credit crisis in the property industry is spreading across Europe, according to a gloomy trading update from Savills.

The property services firm said financing has become more difficult to obtain in many parts of Europe, whilst trading conditions in the UK and US have continued to deteriorate. It said volumes would be significantly down on last year’s figures.

In the residential sector, Savills’ transaction volumes were down about 45% year on year in London, with prime country property now following suit. It added that the financial markets currently show “no signs of improvement”.

The update said: “Europe's major commercial property markets are increasingly feeling the impact of the global credit squeeze. Although there is still cross-border and domestic investor demand for correctly priced assets, our European transaction businesses have seen significantly reduced volumes due to the difficulty in obtaining debt finance and deals taking longer to complete.”

The company would only say that predictions of full year performance were “very difficult,” but ABN Amro, the group’s broker, has slashed its profit forecast for the year to £52m, down from pre-tax profits of £85.5m in 2007.