Property-based derivative volumes have more than doubled in the past year as more banks, investors and companies seek to bet on the asset class and to hedge against a falling valuations. Financial Times.
Bankers say weakness in commercial property prices in some of the key economies, such as the UK and the US, have boosted trading flows.
When property values were rising, many investors were only prepared to buy or “go long”, betting on further appreciation.
This impeded market growth. Now many banks and hedge funds are looking to go short, or sell, in the expectation of falling prices.
In the UK, which has the biggest market in the world, property derivatives volumes rose above £10bn in the third quarter, double the level seen in the same period last year.
The sector was only worth £200m at the start of 2004, according to the Investment Property Databank.
The third quarter saw the first trades in Italy, Switzerland, Hong Kong and Japan.
The US market has grown tenfold since March from $50m to $500m.