Assumptions by the global bond manager Pimco that real estate prices in Cyprus will fall off by a further 30-40% is grossly exaggerated, according to the Association of Valuers and Property Consultants.
The association issued a statement saying that "projections on real estate values are rather difficult to be made given the present uncertainty in the global and local financial market."
It also noted that "the Cypriot real estate sector is going through a recession which is reflected on the real estate sales which has been in decline since 2009," adding that the decline will intensify.
However, Pimco’s assessment that prices will fall by a further 30-40%, from the current lows that are already down by about 40%, was exaggerated, the association concluded.
Pimco was commissioned by the Central Bank of Cyprus to carry out a due diligence review that would determine the capital needs of the banking sector, within the context of seeking an EU-IMF bailout of about 17.5 bln euros that would include paying down a runaway public sector debt and rolling over loans.
However, the outgoing communist government and the Central Bank have come under intense public criticism for exaggerating the capitalisation needs of the banks, initially estimated at 10 bln, but revised down to a range of 5-8 bln.
Part of Pimco’s assessment also included the huge property portfolios held by the banks that have lost their value and cannot be sold.
The Association of Valuers and Property Consultants also pointed out that the changes in real estate prices for the period of 2009 - 2012 vary according to the region or the nature of the property, which comes in contrast to the general approach used by Pimco in its forecasts for the next three years.
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