Spread bet on UK house prices to hedge risk of house price fall?

Barney683

theartfullodger said:

How would you insure yourself against spread betting system going bust?

Highly likely over the coming months, then you'd have lost even more money.

Highly unlikely. Spread bet firms never hold any significant unhedged positions themselves (not reputable ones, anyhow). Volatility is extremely good for brokers of any kind.

Barney683

numbercruncher8 said:

Don't think you can do it any more. I do remember them offering it, but the spread was quite high, so never bothered.
Even if they did, would you really be making a saving? I read the stock markets (presumably residential ETFs) priced in a 12% drop, so the futures would start from there, maybe more. You wouldn't be able to hedge today's price, even if you could every man and his dog would be betting on prices going down which would have the same effect.
I think you could make a synthetic hedge by shorting Rightmove, OnTheMarket, PurpleBricks, but that comes with a theoretical (but unlikely) unlimited loss.

Thanks. I have considered making a "synthetic hedge" like you suggest. But the problem is that a falling market drags those stocks down (and a rising one drags them up) quite irrespective of housing market activity. (e.g. right move currently 32% below its Febuary peak, when house prices cannot have fallen by anything like that).

I guess I could create an opposite-sided bet on the market in general (FTSE-250 say) so that the only exposure was to estate agents movement relative to the market (perhaps I would include some REITs in in too). 

But this certainly seems riskier to me than the (no longer extant) bet-on-house-prices route. And any attempt to determine the right size of bet would be largely guesswork - I could examine historical correlation between estate agent moves and house price moves but this would hardly be an exact science,.

Nevertheless, I will consider it (carefully!) Cheers.

Barney683

Thrugelmir said:

Late to the party to hedge such a risk. You'd struggle to find a counterparty at a competitive cost. A spike in deaths in itself will bring a lot of property onto the market in a short window. 

True about deaths bringing of housing surfeit (especially deaths of older people).

On the other hand I can see one reason why house prices could increase. Rental income is seen as a safe haven when markets are seen as unsafe. So buy-to-let sales could increase, I guess.   

As to how late to the party - I await the next Halifax house price index (or similar) announcement with trepidation. Hopefully, if a fall is coming it might not have kicked in in earnest yet (they went up 2.8% last month so all may not be lost).