Securities of property trust group, GPT hit their lowest level ever this morning after it slashed its 2008 earnings estimate and distribution by around 30%.

GPT’s downgrade, issued before the market opened, saw its securities fall more than 18% at the opening to an all time low of $1.96. They then recovered to trade around $2.05. The last time that price was reached was back in 1993. It helped push the market down 1.6% by 11.30 am.

The news from GPT continues the downgrades from the property trust sector, especially those that have moved offshore in a major way, like Valad, APN, the various Babcock and Brown groups, Mirvac and others. GPT dropped its guidance for full-year operating income to $464 million from $633 million because of what it said was the deterioration in global credit and financial markets.

You could say that the downgrade marks GPT’s acceptance of the new realities of international finance: it’s grim and getting grimmer for companies with a whiff of leverage or looking to sell assets to generate profits. GPT said in its statement this morning that the continuing deterioration of global financial, credit and property markets was having a marked impact on real estate companies, and difficult operating conditions are expected for the rest of 2008. Some companies have been aware of that for some while (Allco, Babcock and Brown, Macquarie Bank). Others, like Lend Lease, have yet to accept this new reality, judging by the way it wants to launch takeovers in the retirement sector (for groups like FKP).

The downturn internationally, which has just been recognised by GPT management, is the same loss of confidence that has seen markets sold off, especially since May. That’s pushed our market lower and, despite that relief, rebound Friday, the downward trend re-emerged this morning. The slump and similar moves downwards in bank stocks, and resources companies (BHP Billiton dipped under $40 a gain) saw the market down 1.6% or more than 80% points by 11.30am. It was a sea of red across all indices and their sub groups.

The company also revised its distribution guidance to 20 cents per share with earnings guidance slashed 30% to 21.2 cents per share. Profit would fall because GPT would be delaying a partial sell down of its 40% stake in a wholesale office fund, lower development profits and fewer asset sales, all things the company planned for its financial year to December 2008.

Now economists at Goldman Sachs JBWere warned this morning of the possibility of a further problem for banks and financial groups: a downturn in credit as the year goes on.

“The demand for credit in Australia remains in clear retreat as household and financial deleveraging takes centre stage,” they wrote.

Goldman Sachs said the release last Monday of the RBA credit data for May “illustrates an economy shunning credit as the twin forces of high interest costs and heightened economic uncertainty begin to bite:

Given credit acts as the grease in the engine of economic activity, its absence risks a period of economic underperformance and fears of seizure.

A deteriorating global growth outlook, suggest consumers and businesses alike will adopt an increasingly cautious approach to new credit and will actively seek to repay the stock of debt.

Indeed, loan approval data now suggests the banks will shortly witness materially weaker loan growth following a sharp decline in business loan approvals and to a lesser extent home loan approvals.