new property derivative

Nigel Ward · 11-09-2008, 01:58 PM

Quote:

BUYING into Australia's $3.2 trillion housing market -- without owning a single property -- will soon be a mouse click away.
An agreement between the Australian Securities Exchange and property research groups PR Data and Rismark has paved the way for the introduction next year of residential property derivatives, which will be traded on the ASX like shares, The Australian reports.
Modelled on a successful US scheme that had $US2 billion ($2.5 billion) worth of trades in its first year, Australian investors will be able to both buy and sell derivative or futures contracts in our major housing markets without owning property.

"It's a synthetic way of gaining exposure to Australian housing markets,'' said Paul Williams, the head of property derivatives for GFI Australia.
"This is exciting for our developing property derivatives market.''
The scheme is mostly pitched at investors seeking exposure to property without the hassles of owning real estate and the typical $20,000-$50,000 transaction costs involved in buying and selling residential property. It could also be a godsend for renters priced out of the market by escalating prices.
Rismark International executive director Ben Skilbeck said first-time buyers required to save a $100,000 deposit for a $500,0000 home were commonly locked out because by the time they had saved their deposit, the cost of the house had risen another $200,000.
Mr Skilbeck said owing derivatives meant savings would effectively increase in line with house prices, providing a hedge against a future housing boom.
While the ASX declined to reveal details of the scheme -- including the cost to investors -- market players will be able to punt on falling house prices.
"If prices are going down in Perth, I will be able to sell my derivatives contract at a profit,'' said one analyst.

AsxBroker · 11-09-2008, 02:07 PM

Hi Nigel,

Interesting concept, not sure if a derivative is such a good idea with so many shortsellers out there already.

St George own part of a fund manager called Ascalon who run Fortuna Funds Management which invests directly into residential property. Fortuna Funds Management - Residential Property Trust of Australia

Cheers,

Dan

PS This is general information and not a recommendation to buy, sell or hold any securities or managed funds.

crc_error · 11-09-2008, 05:32 PM

Quote:

Originally Posted by AsxBroker

Hi Nigel,

Interesting concept, not sure if a derivative is such a good idea with so many shortsellers out there already.

St George own part of a fund manager called Ascalon who run Fortuna Funds Management which invests directly into residential property. Fortuna Funds Management - Residential Property Trust of Australia

Cheers,

Dan

PS This is general information and not a recommendation to buy, sell or hold any securities or managed funds.

In their PDS I don't see how they show the LPT sector as the highest performing sector out of all classes..

AsxBroker · 11-09-2008, 06:49 PM

Hi CRC,

Are you referring to Graph 1, page 11 of the PDS?
http://www.fortunafunds.com.au/Documents/RPTA_PDS.pdf

This graph shows that retail property, listed property, residential property and shares all return an average of over 12% pa. Like I've said in other posts, as long as your invested in growth assets you'll win in the end.

If your referring to Graph 2 on the same page, I would say that the PDS date is 26 September 2006, it would be very interesting to see more up-to-date figures

I can't believe there is still a thread about people saying whether shares or property are better. I think both is important for diversification and both can be leveraged 100% (some forum members haven't stumbled across Perpetual Investment Series and Macquarie Protected Loans which can be leveraged to 100% just like a property loan with a 100% LVR). Also think Long Term Capital Management which LVR'd to the max (and messed up!).

I'm hoping that other members will realise this soon.

Cheers,

Dan