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Real estate research group Rismark International and property data company RP Data Ltd have agreed to form an over-the-counter (OTC) residential price derivatives market with broker GFI Group Inc.
The actively traded property derivatives market will be based on indices developed by the listed RP Data and Rismark.
Booming property prices are attracting development of financial products that help spread the benefits and risks of expanding real estate markets beyond home owners, the companies said.
"House price derivatives will be useful for investors who want to gain, diversify or hedge their exposure to residential property, without the complexities associated with transacting in the underlying physical market," GFI senior managing director for Asia Pacific Jurgen Breuer said.
Developing the derivative market gives renters a chance to cash in on price rises, making it possible to put any gains toward buying a new home for themselves.
Home owners also could hedge against falling property prices, while lenders and insurers can use the market to help reduce the risk of default.
"GFI and our partners are working on this new risk management tool to add a new dimension to Australia's highly developed and sophisticated real estate market," Mr Breur said.
According to the new benchmark RP Data-Rismark Australian Property Index, national property prices fell 0.59 per cent last month.
The new indices, which will measure prices by postcode, capital city and state, will be published monthly and quarterly.
The real estate derivatives market is well developed in the UK and the US.
The UK has some £3 billion (A$7.46 billion) worth of over-the-counter commercial and residential property derivatives outstanding, making it the world's biggest such market.
The Chicago mercantile exchange launched residential real estate futures contracts on 10 US cities in May 2006.
Closer to home, the Australian Financial Markets Association recently formed a property derivatives working group, comprising of GFI, Rismark, RP Data as well as investment banks including Goldman Sachs, Merrill Lynch, the Royal Bank of Scotland and Deutsche Bank.
RP Data is the largest supplier of property data in Australia and New Zealand while Rismark specialises in real estate research, funding and securitisation.
- AAP
