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. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Property price collapse highlights value of derivatives market

Against a backdrop of the most savage falls in UK commercial real estate values ever recorded – IPD’s UK index fell 3.6% in November and 3.7% in December – the real estate derivatives market has not been found wanting.

With volumes reaching record levels despite unprecedented widening in spreads, the end of 2007 and beginning of 2008 might eventually be the period when the market came of age.

Volumes traded in 2007 reached £7.21 billion compared with £3.88 billion in 2006 and there is now £9 billion in notional trades outstanding. Trades in the fourth quarter of 2007 reached £1.662 billion – with 214 contracts being traded, the highest number ever – compared with £1.66 billion in the third quarter, £970 million in the second quarter and £2.72 billion in the first quarter.

"The market has grown significantly," says Nick Nabarro, spokesman for IPD in London. A total of 22 banks are now licensed to trade real estate derivatives by IPD, with 11 of those licences to trade more than one market – although the UK market still remains the largest – and a further four banks are in talks to gain licences. "There has been a long-term educational push by IPD, banks, brokers and other parties and it happened that the peak of this educational cycle coincided with the sub-prime crisis," says Nabarro.

Nabarro believes that the market is reaching critical mass – property owners and fund managers are more comfortable with derivatives – just as the potential uses of derivatives are made more obvious by the dramatic changes in the real estate market.

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.


Unlimited access to and

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


Unlimited access to and, 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


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