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eviluncle

Hedging House Prices

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I often use spreadbetting instead of direct investment due to it's tax free status. IGINDEX who I use most used to keep markets based on UK houseprices and the various UK regions using quarterly contracts; the furthest out in time used to be 15 months. The prices they quoted were based on the Halifax's house price index. I recently took a view that it would be a good bet that the U.K house prices would fall in the next year so I looked to check the prices quoted. To my surprise the furthest out contacts they were offering expired in September this year. Upon e-mailing customer services I was informed that IGINDEX were phasing out their bets on house prices!

This set me thinking, normally a spread betting company will hedge against customers betting one way by matching them with customers betting the other. If this can't be done then the spread betting firm will make the same bet themselves just pocketing the spread and avoiding market risk. I have no proof but could it be that many people are trying to hedge against their houses falling in value and IGINDEX can find nobody to take their hedging down bet? As an aside I believe that Goldman Sachs are producing a financial instrument which allows people to bet on house prices, has anybody any knowledge of this?

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I often use spreadbetting instead of direct investment due to it's tax free status. IGINDEX who I use most used to keep markets based on UK houseprices and the various UK regions using quarterly contracts; the furthest out in time used to be 15 months. The prices they quoted were based on the Halifax's house price index. I recently took a view that it would be a good bet that the U.K house prices would fall in the next year so I looked to check the prices quoted. To my surprise the furthest out contacts they were offering expired in September this year. Upon e-mailing customer services I was informed that IGINDEX were phasing out their bets on house prices!

This set me thinking, normally a spread betting company will hedge against customers betting one way by matching them with customers betting the other. If this can't be done then the spread betting firm will make the same bet themselves just pocketing the spread and avoiding market risk. I have no proof but could it be that many people are trying to hedge against their houses falling in value and IGINDEX can find nobody to take their hedging down bet? As an aside I believe that Goldman Sachs are producing a financial instrument which allows people to bet on house prices, has anybody any knowledge of this?

IG are no longer accepting new bets on the UK housing market. Have a look at www.spreadfair.com. They offer a service that is actually better than the one that was offered by IG.

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IG are no longer accepting new bets on the UK housing market. Have a look at www.spreadfair.com. They offer a service that is actually better than the one that was offered by IG.

Can you explain the spreadfair house price tables to me and how you use them? This is something I've not seen before.

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I often use spreadbetting instead of direct investment due to it's tax free status. IGINDEX who I use most used to keep markets based on UK houseprices and the various UK regions using quarterly contracts; the furthest out in time used to be 15 months. The prices they quoted were based on the Halifax's house price index. I recently took a view that it would be a good bet that the U.K house prices would fall in the next year so I looked to check the prices quoted. To my surprise the furthest out contacts they were offering expired in September this year. Upon e-mailing customer services I was informed that IGINDEX were phasing out their bets on house prices!

This set me thinking, normally a spread betting company will hedge against customers betting one way by matching them with customers betting the other. If this can't be done then the spread betting firm will make the same bet themselves just pocketing the spread and avoiding market risk. I have no proof but could it be that many people are trying to hedge against their houses falling in value and IGINDEX can find nobody to take their hedging down bet? As an aside I believe that Goldman Sachs are producing a financial instrument which allows people to bet on house prices, has anybody any knowledge of this?

Ah.... this is very interesting. I had been wondering how this contract worked as I couldn't see how they could offset the risk. Now we know they can't, and we also know it is likely that a significant amount of money is being positioned on HPs falling.

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I often use spreadbetting instead of direct investment due to it's tax free status. IGINDEX who I use most used to keep markets based on UK houseprices and the various UK regions using quarterly contracts; the furthest out in time used to be 15 months. The prices they quoted were based on the Halifax's house price index. I recently took a view that it would be a good bet that the U.K house prices would fall in the next year so I looked to check the prices quoted. To my surprise the furthest out contacts they were offering expired in September this year. Upon e-mailing customer services I was informed that IGINDEX were phasing out their bets on house prices!

This set me thinking, normally a spread betting company will hedge against customers betting one way by matching them with customers betting the other. If this can't be done then the spread betting firm will make the same bet themselves just pocketing the spread and avoiding market risk. I have no proof but could it be that many people are trying to hedge against their houses falling in value and IGINDEX can find nobody to take their hedging down bet? As an aside I believe that Goldman Sachs are producing a financial instrument which allows people to bet on house prices, has anybody any knowledge of this?

Slightly off the point, I also use spreadbetting services for share trading, at the moment I have only used CMC, any reason you choose IGINDEX, do you (or anyone on here) have an opinion on the best SB company to use and what is your reasoning?

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Slightly off the point, I also use spreadbetting services for share trading, at the moment I have only used CMC, any reason you choose IGINDEX, do you (or anyone on here) have an opinion on the best SB company to use and what is your reasoning?

Well when it comes to spreadbetting house prices. Spreadfair really does appear to be the best. IG only offer two quarters forward now and you are stuck with their rediculously sized spreads.

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Ah.... this is very interesting. I had been wondering how this contract worked as I couldn't see how they could offset the risk. Now we know they can't, and we also know it is likely that a significant amount of money is being positioned on HPs falling.

They can't offset the risk, but spreadfair.com itself does not need to. They simply allow traders to match their up an down spreadbets through their site. It is an open order book where anyone can make prices. You are right though GARCH about the amount of money being position on HPs.

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I would tend not to read too much into these things.

The publicity value of the index was probably greater than the value of that they made through market making.

Spreadfair do an, imho, excellent set of spreads for the various house price markets, and the MPC decisions, which you may also want to hedge if you have a mortgage.

FYI: we have an 80% chance of a rate rise, at the next MPC meeting, on May 10.

Edited by simonhr

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  • 302 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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