The property derivatives market is booming.
The total volume of Investment Property Databank derivatives traded in the first quarter rose to a record £3.67bn, more than double the amount traded in the preceding three months, IPD said today.
There were a total of 283 trades, easily eclipsing the previous record of 236 transactions in the fourth quarter of last year. The total volume of IPD derivatives now stands at £17bn, with the outstanding notional amount at £10.4bn.
The IPD UK Annual Property Index continues to be the index underlying the majority of trades, making up £3.44bn of the total notional traded in the first quarter of this year.
Trading on IPD’s European indices is also growing - £116m of IPD France derivatives and £110m of German trades were transacted in the first quarter. A total of £904m of French trades and £394m of German trades have now been made.
‘The biggest quarterly property derivatives volume on record coincided in the first three months of this year with the largest single quarter’s divestment from their direct property asset bases by UK institutional investors,’ said Ian Cullen, head of systems and information standards at IPD.
Nick Scarles, chairman of the Property Derivatives Interest Group and finance director of Grosvenor, said: ‘This substantial increase in volumes confirms that property derivatives are here to stay. Derivatives are now an accepted means for an increasing range of institutions and other professional investors to adjust their exposure to the UK property sector.’
