Tuesday, November 4, 2008

European Property Derivative Trades In Q3 Down 38%

Source : The Business Times, November 4, 2008

(LONDON) The total volume of European property derivative trades fell 38 per cent quarter-on-quarter to £1.15 billion (S$2.7 billion) in three months to Sept 30 as the global financial maelstrom curbed growth in the infant market.

Data from index provider Investment Property Databank (IPD) showed yesterday that a total 166 trades were struck in the third quarter, the lowest number of quarterly trades since the corresponding period last year. Despite a slowdown in the number of deals, the total notional value of UK trades completed in 2008 so far is still some way ahead of the £5.6 billion of trades seen by the end of the third quarter 2007, indicating a resilient core of support for the most mature of Europe's property derivatives markets.

Some £1.03 billion of UK commercial property derivative trades were completed in the third quarter, bringing the notional value of deals struck to £6.1 billion over the year to date. 'Given the financial crisis besetting investment banks at present, it is encouraging that the level of derivative activity which depends on their participation has held up as well as it has,' said Ian Cullen at IPD.

The property derivatives market mostly offers over-the-counter trading in swaps based on benchmark total return property indexes for fixed periods, in exchange for interest payments.

Property swaps enable investors to increase or hedge exposure to real estate without having to buy or sell bricks and mortar in costly and time-consuming transactions.
Third quarter French property derivatives trading volumes were the lowest since trading began in the first quarter 2007, falling by 55 per cent compared with the second quarter 2008.

In Germany, trades fell by 28 per cent on the previous quarter and by half compared with the same period last year. -- Reuters

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