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Four out of five commercial properties could still be overvalued, casting doubt on the worth of property funds, according to new data.
Property measurement group IPD, whose figures are used for benchmarking fund manager performance, for real estate derivatives and for spread betting, says up to 82% of the valuations of properties in its index may be wrong.
It says anyone using its information should be aware that many figures "underpinning rental returns and capital values have been issued with warnings about heightened uncertainty".
It blames "market instablity" for these warnings although it believes its figures are still the "best indication".
NB Real Estate, a commercial property agency, says valuations of properties within funds have now lagged too far behind the real price at which properties are being bought and sold.
Over the past year, the IPD main index has fallen by about 20%.
But NB Real Estate believes the real property market fall is 30-35%.
"This is based on actual transactions where real cash changes hands rather than on valuations where the property is not for sale. The collapse of Lehman Brothers is a factor in accelerating the fall in prices," says Peter Trinder at NB. "Valuations are especially difficult when the volume of sales through the market is so low.
"This is why many property funds and listed property companies are trading at such a discount to their net asset value; they are reflecting the real prices at which properties are selling at and factoring some further declines in values going into the new year.
"Valuing commercial properties is a tough job at the best of times but the gap now between real prices and official valuations is significant."
This is bad news for investors in insurance and unit trust-based property funds, some of which have banned holders from cashing in as property market sources suggest cash buyers - few can borrow from banks - are all holding out for deals where they can see a total return approaching 15% per annum over the medium term, which means prices may still have some way to fall.
Trinder said: "The only substantial sellers of commercial property in the market are those funds that need to because of redemptions and other cash-strapped forced sellers."
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