The big four banks may be exposed to massive losses because of over-inflated commercial property valuations, The Australian reported today.
One senior banking official who spoke with the daily said this was due to ‘friendly’ valuations by the banks.
Andrew Parsons of property fund manager Resolution Capital, who commented on issue, said it was true that valuations had overshot real market values.
“What that means is there is a high risk that gearing in some of these vehicles is in fact understated so they’ve got high levels of debt on inflated valuations,” he said.
For the majority of the sector however, Parsons conceded that the situation is not too dire, but pressed that such practices needed attention.
“Some of the practices of the industry are going to have to be addressed to keep the long-term confidence and long-term future funding requirements,” he said.
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