Savills issued its second profit warning in three months yesterday, blaming worse-than-expected conditions in the global property market and the drought in mortgage finance.

The upmarket property group, which has more than 200 offices worldwide, said that its profits for 2008 would be well below forecasts and that it would review its dividend payment to investors.

The shares fell by 9.6 per cent to 226p after the announcement — far below their peak of 732p in May 2006, when the housing market was in full throttle. Analysts cut their profit forecasts to £32 million for 2008, down from £85 million reported last year.

The group said that the UK residential outlook had not deteriorated further since October, when the market suffered from the fallout from the collapse of Lehman Brothers. However, the lack of mortgage availability had caused a significant fall in volume at Savills Private Finance, its broking arm. Poor sales of homes and offices in Europe and the US were to blame for the pessimistic global outlook.

Jeremy Helsby, the chief executive, said: “Whilst some deals are completing, we are not seeing the seasonal pick-up in activity we have grown to expect. Many pipeline transactions, which were at an advanced stage, have either been delayed or are not proceeding.”

He added that, while the bottom of the market was difficult to call, the gap between sellers' expectations and what buyers want to pay would start to narrow in the second half of 2009.

Savills said that its UK residential and commercial businesses were performing as expected in the final quarter of the year, although sales remained static. London properties valued at £5 million or more remain relatively immune to the downturn, while “green shoots” of recovery were beginning to emerge as the number of viewings rose.

The reported increase in interest from potential buyers on the hunt for a bargain was echoed by figures from the Building Societies Association (BSA) published yesterday, which found that 46 per cent of people thought that it was a good time to buy, compared with 27 per cent of those surveyed in July.

Separate data from the National Association of Estate Agents showed that the number of sales per agent fell from seven in October to six in November but that the number of first-time buyers on agents' books rose for the third month in a row to 10.4 per cent.

Paul Broadhead, the head of mortgage policy at the BSA, said: “With sentiment playing such an important role in the property market, the gradual increase in the numbers of people who believe it is a good time to buy bodes well for 2009. Also, it is clear that increasing numbers of people believe that mortgage finance is more affordable than earlier in the year.”

Savills said that a return to higher levels of transactions would depend on how quickly confidence returned to financial markets and banks could resume lending.

It expects that residential property prices will fall by a further 11 per cent next year and will not show signs of a recovery until 2010 at the earliest, with London and the South East leading the way.

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