The value of UK property derivatives trades executed in the second quarter of this year dropped almost £2bn compared to quarter one, figures released yesterday revealed.

Research from the Investment Property Databank shows that during the second quarter, 90 trades were completed with a notional value of £970m. This is a 67% drop in value on the first quarter, when 153 trades with a notional value of £2.9bn were executed.

Peter Sceats, director at property derivatives specialist TFS Property, said: "The IPD volume figures do indeed show a much lower derivative volume than the previous quarter, but to be fair the first quarter’s £2.9 billion was far above our expectation. In any case, the route to major derivative market status for property is not linear."

Trading did see an increase compared to the equivalent period in 2006, when 54 trades were executed with a notional value of £513m.

Overall, the outstanding value of UK property derivatives trades stands at £7.3bn from 473 lives trades.

Increases were seen in French and German property derivatives, and trades have now reached a sufficient level that the IPD will report on these markets.

At the end of the second quarter, 30 French property derivatives trades has been executed, with a notional value of £721m, and 21 German property derivative trades had been executed, with a notional value of £181m.

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