Global property derivatives volumes lowest since 2005: IPD

Property derivatives trading stripped back to a UK-only activity last quarter as France failed to record any trades in the shallowest three-month period in five years, according to the fourth-quarter IPD Global Property Derivatives Trading Volumes.

The UK recorded total volume of £192 mln (EUR 228 mln) in 52 trades, compared to £731 mln in Q3, the majority of which were between banks and end-users. There were no French trades for the first time since IPD started recording activity at the start of 2007. Elsewhere, Germany completed an entire year without any trading activity - and has only registered £15 mln worth of trades in the last two years.

Global trading volumes over 2010 were the lowest since 2005, at £1.8 bn, compared to an annual figure of £3 bn in 2009.

'Participants in derivatives transactions are taking longer to return to the market even as underlying property markets have improved. A continuing uncertain economic outlook and regulatory regime is affecting market confidence,' said Kate Pedersen, derivatives client manager at IPD.

'Pricing was attractive in Q3 where we saw much greater trade volumes but moved out in Q4, compared to the wider investable property market but this is now creating selling opportunities. And it must be said that even given the fluctuations in recent volumes, this does not reduce the importance of derivatives to property investors over the long term and interest remains strong,' Pedersen said.