The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Capital Markets

Synthetic real estate – going nowhere fast

Structured note sellers had high hopes that property-linked pay-offs would be a big revenue generator in the UK. However, recent real estate upheavals have cast a dark cloud over the market.

The property swaps market


WEST BROMWICH BUILDING Society did very well out of the UK house price boom. But not just from supplying mortgages. The company also had a nice little earner in supplying retail investors with synthetic exposure to the residential property market through capital-guaranteed structured notes. The emergence of a derivatives market on property over the past few years, led by the dealing desks of investment banks, meant that West Bromwich could buy exposure to house prices via swap agreements with banks before selling it on in note format to end investors. Recent house price upheavals, however, have had a nasty effect on the market.

"We don’t plan to look at either commercial or residential indices for some time," says Andy Heseltine, West Bromwich’s savings and investment product manager. The building society was still marketing property price-linked notes at the start of the year. Specifically, it was selling a five-year, capital-guaranteed product that offered investors exposure equally to the performance of the FTSE100 and the Halifax House Price Index (HPI). Heseltine says sales have been disappointing. "The general appeal went towards the end of the offer period. Over the last three or four months the media coverage, and the actual performance figures, have not been that exciting," he says.


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree