On the face of it, a prime London office building with an A-list investment bank tenant and a house repossessed from a subprime borrower in California may have little in common.

But such has been the force of the re-pricing of credit that properties of all sorts in many places have become markedly more difficult and expensive to finance over the past month.

The transmission mechanism is not just lenders pulling in their horns from property, but an unwillingness of banks to lend to each other that is driving up the cost of money for all.

It is also true that in many places, notably Britain and Spain, both commercial and residential property have been in a speculative bubble pretty similar to the one now unwinding so painfully in the U.S.

Similar, in that property investment everywhere was fuelled by global markets with super-easy borrowing terms.

Similar too, in that many property markets were, in the final analysis, going up because they were going up. People were buying because they expected future gains and feared missing out.

But the credit crunch is now having a real impact.

The Royal Institute of Chartered Surveyors on Thursday reported the first house price fall in two years, with its index falling to -1.8 in August, RICS said that higher borrower costs prompted by a global scramble for cash might prompt the market to soften further.

There is also anecdotal evidence from Germany, Asia and Britain that lenders to commercial property are asking for more equity in deals they finance and demanding higher interest rates.

LONDON OFFICE MARKET VULNERABLE

Royal Bank of Scotland has cut by half its estimate of issuance of asset backed securities, used to finance commercial and residential investment, for the remainder of the year. RBS now forecasts 109 billion euros in new issues, against 210 billion euros before.

"We expect that bank lending for commercial mortgages too has undergone a major re-pricing that will have longer term implications for the European real estate markets," RBS analyst Ron Thompson wrote in a report published on Wednesday.

"This re-pricing will tend to force the market to re-adjust to smaller deals and structures."

Prime yields on West End London offices are now at about 3.5 percent, according to Morgan Stanley, while five-year swap rates, a measure of financing costs, stand close to 6.5 percent.

That means rents don't cover the cost of financing. And with many predicting contraction in investment banking and financial services, its hard to expect strongly rising rents.

"We are forecasting falls in property values in the UK," said Martin Allen, who covers property at Morgan Stanley Research Europe in London.

"There is risk on the downside from our central case which is a modest fall of property values. There is a relatively high probability that it is going to be worse than that."

Allen sees it as a global phenomenon and one that won't improve quickly even if interbank lending issues settle down.

"The problems are systemic, there has been overlending to property and it will take years to purge from the system."

HOME IS WHERE THE RISK IS

Beyond Britain, in New Zealand July house sales were down 14 percent from a year ago, though prices were still at record levels. Irish house prices fell for the first time in 11 years in July and the end of a construction boom in Spain has crimped economic growth.

While the housing woes started with loans to dicey subprime borrowers in the U.S., a major knock on effect has been to prompt a scramble for cash by banks fearing that they will be forced to take questionable debts back on to their balance sheets.

Three month interbank rates in sterling now stand at 6.88 percent, more than a full percentage point above official rates. In the euro zone three month interbank rates are 4.73 percent, against a 4 percent ECB rate.

That has sent interest rates to homebuyers up, even without hikes by central banks.

Britain's Halifax Bank, Standard Life and Abbey National all raised their tracker mortgage rates this week.

"This only adds to affordability problems, which are already pretty stretched," said Howard Archer, chief economist at Global Insight in London.

Yields on British residential property are also quite a bit lower than financing costs, with many small investors subsidizing their running costs out of capital in hopes of future capital gains.

If those gains, which have been massive in recent years, don't continue, many will decide that subsidizing someone else's monthly housing costs no longer looks like such a great deal.

There are a lot of reasons why Britain is different than the United States. There are a lot of reasons why Ireland and France are, as well.

But that is what house buyers in New York were saying about Florida not so long ago.

James Saft is a Reuters columnist. The opinions expressed are his own.