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http://www.ft.com/cms/s/2/0eac0c6e-88f3-11...144feabdc0.html

Derivatives open door to trading on house prices

By Sharlene Goff

Published: August 14 2009 17:54 | Last updated: August 14 2009 17:54

Opportunities are emerging for investors to increase their exposure to the housing market without having to pay high taxes and fees or go through the process of buying a property.

A number of private banks are offering clients the chance to trade property derivatives – investments that allow them to speculate on rising or falling house prices without having to purchase a house. In another development, CityOdds, a financial betting service, has started providing bets on UK house prices for retail customers from as little as £5.

.../

You've got to be kidding.

When will this utter, utter madness end? :(

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http://www.ft.com/cms/s/2/0eac0c6e-88f3-11...144feabdc0.html

Derivatives open door to trading on house prices

By Sharlene Goff

Published: August 14 2009 17:54 | Last updated: August 14 2009 17:54

You've got to be kidding.

When will this utter, utter madness end? :(

AAA rated spreadbetting.

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I'm just thinking - derivatives tend to quench demand for the real thing, right? Gold derivatives quench demand for physical, etc.

House price derivatives will remove demand for the physical and accelerate the crash then, right?

Mind you, heaven help us if they start a futures market.

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I'm just thinking - derivatives tend to quench demand for the real thing, right? Gold derivatives quench demand for physical, etc.

House price derivatives will remove demand for the physical and accelerate the crash then, right?

Mind you, heaven help us if they start a futures market.

No, derivatives will help accelerate the move in whichever direction the investment community decides the market should move. Usually, but not always, the derivative is underwritten in the physical market. In the case of house prices, spread firms have offered prices for a while, however these have not usually been underwritten but have been the opinion of the punter versus the bookie. If these derivatives are to be underwritten in the physical market and the market throws money at higher prices then it could push prices up dramatically. The oil bubble is a classic example.

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No, derivatives will help accelerate the move in whichever direction the investment community decides the market should move. Usually, but not always, the derivative is underwritten in the physical market. In the case of house prices, spread firms have offered prices for a while, however these have not usually been underwritten but have been the opinion of the punter versus the bookie. If these derivatives are to be underwritten in the physical market and the market throws money at higher prices then it could push prices up dramatically. The oil bubble is a classic example.

So is this not a way to get the QE money to prop up prices? We have seen the stock market ramp caused in part by QE, could the same happen with HP?

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No, derivatives will help accelerate the move in whichever direction the investment community decides the market should move. Usually, but not always, the derivative is underwritten in the physical market. In the case of house prices, spread firms have offered prices for a while, however these have not usually been underwritten but have been the opinion of the punter versus the bookie. If these derivatives are to be underwritten in the physical market and the market throws money at higher prices then it could push prices up dramatically. The oil bubble is a classic example.

How would you hedge in the physical market?

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Can anyone explain why this is news?

I think another poster has already done this. Derivatives can only lead to increases in the velocity of price changes, potential volatility and house prices driven more by market trader sentiment than supply/demand.

A futures market would be catastrophic, surely? Since future and current prices are tied by contango which is more "fixed" than the prices themselves, you're really just handing people the ability to speculate for even less money down than finding a deposit for a mortgage. Can you imagine a house exchange run by the vampire squid in London, allowing billions of hot money to speculate on global property for 10% down? I'd hang myself.

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White said that, at the beginning of 2009, the futures market was anticipating a further 32.5 per cent fall in prices. However, the 2010 price is now trading at an average house price of £161,606, a 2 per cent increase from the December 2008 level.

:rolleyes:

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I think another poster has already done this. Derivatives can only lead to increases in the velocity of price changes, potential volatility and house prices driven more by market trader sentiment than supply/demand.

A futures market would be catastrophic, surely? Since future and current prices are tied by contango which is more "fixed" than the prices themselves, you're really just handing people the ability to speculate for even less money down than finding a deposit for a mortgage. Can you imagine a house exchange run by the vampire squid in London, allowing billions of hot money to speculate on global property for 10% down? I'd hang myself.

"I think another poster has already done this. "

Which thread was that on?

"A futures market would be catastrophic, surely? Since future and current prices are tied by contango which is more "fixed" than the prices themselves, you're really just handing people the ability to speculate for even less money down than finding a deposit for a mortgage."

I can't see how this applies to the housing market

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I think another poster has already done this. Derivatives can only lead to increases in the velocity of price changes, potential volatility and house prices driven more by market trader sentiment than supply/demand.

A futures market would be catastrophic, surely? Since future and current prices are tied by contango which is more "fixed" than the prices themselves, you're really just handing people the ability to speculate for even less money down than finding a deposit for a mortgage. Can you imagine a house exchange run by the vampire squid in London, allowing billions of hot money to speculate on global property for 10% down? I'd hang myself.

How would a derivatives Market affect OO/ FTB access to credit/ mortgages (the main driver of house prices AFAIK)?

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Ok, count me in.

$10 says that the govt will report gently rising house prices until your elections, then drop off sharply thereafter.

http://www.ft.com/cms/s/2/0eac0c6e-88f3-11...144feabdc0.html

Derivatives open door to trading on house prices

By Sharlene Goff

Published: August 14 2009 17:54 | Last updated: August 14 2009 17:54

You've got to be kidding.

When will this utter, utter madness end? :(

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Does anyone remember one of the segments in the original TV Star Trek where they discovered three bodiless brains under a plexiglass dome whose sole occupation was to bet against each other over the most minor aspects of human existence?

Ok, count me in.

$10 says that the govt will report gently rising house prices until your elections, then drop off sharply thereafter.

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