earn money from falling house prices ?????

hgllgh

Does anyone in the investment industry actual contribute anything of value to society?? http://www.thisismoney.co.uk/investing/article.html?in_article_id=427362&in_page_id=166&ct=5

!!!!!! ... How can you set up an investment fund on falling house prices ?
Nothing is being generated ... No wealth is being created. Just an over priced asset being re-priced. And it's these bloody investors who contributed to this bloody mess in the first place.

Spreadbetting firm Cantor Spreadfair says that City punters are calling a fall of around 15% for London house prices in 2008 – with bets of £2m to £3m being wagered.

So is the cuty just one big financial ladbrokes now ?

Generali

It's a good hedge for BTLers. They can insure against the possibly falling value of their property.

epz_2

whos dumb enough to put a spread bet on that prices will go up.

lynzpower

but isnt spread betting about the movement of prices not what those prices actually are.

hgllgh

yeh but epz point is still valid ... who is putting money on prices moving up?

so the idea is that BTLers can bet on prices going down oh the irony ... so if they do they make money on the bet and if they don't then they make money from prices going up?

but either way they lose because they either lose the bet or lose value in their BTL ? Just doesn't make sense

m00m00

Btl'ers won't have any spare money to bet though, they'll be spending too much on subsidising their tenants in their negatively geared, new build 'luxury' apartments.

Generali

lynzpower wrote: »

but isnt spread betting about the movement of prices not what those prices actually are.

A spread bet like the Cantors' one below is a bet as to whether the price of a particular index will be above or below a particular spread of prices.

For example, if you were betting on the Halifax average house price for the UK, the spread for Dec 2008 could be 200-202. Each point being £1,000 of house prices.

If you think the figure will be below 200 you sell, if you think it's going to be above 202 you buy. If you sell at £10 per point and the Halifax figure is £175,000 then you win £(200-175)*10 = £250. If you'd bought at £10 a point (because you thought the price would rise) then you'd have losses of £(202-175)*10 = £270.

hgllgh wrote: »

yeh but epz point is still valid ... who is putting money on prices moving up?

If the bet is predicting falls of 15% then nobody. The buyers are betting on (nominal) falls of less than 15%, the sellers are betting on nominal falls of greater than 15%.

hgllgh wrote: »

so the idea is that BTLers can bet on prices going down oh the irony ... so if they do they make money on the bet and if they don't then they make money from prices going up?

but either way they lose because they either lose the bet or lose value in their BTL ? Just doesn't make sense

To take an example, let's say you're a BTL person. You put £50k of cash (not MEWed) a few years back into buying a 2 bed terrace at £100k that you rent out at £600pm. The value of the house has doubled to £200k, the rent hasn't budged.

The rent is very easily covering the mortgage, even if your yield is terrible (and a massive sell signal). Trouble is, if you sell, you have a massive CGT bill plus a load of hassle and solicitor's bills so instead you hedge against the fall. Be prepared to lose £2k say to cover maybe half or so of your potential losses.

epz_2

lynzpower wrote: »

but isnt spread betting about the movement of prices not what those prices actually are.

you still need someone betting above the spread or there will be nobody to pay out.

anyone bullish about the market will be buying shares in land companies, btl's etc so its just a spread bet between bears on how far prices will deviate from the average expected drop.

Generali

epz wrote: »

you still need someone betting above the spread or there will be nobody to pay out.

anyone bullish about the market will be buying shares in land companies, btl's etc so its just a spread bet between bears on how far prices will deviate from the average expected drop.

AFAIK, Cantors isn't a bet matching service: they make a book so Cantors will be on the other side of any bet, hedging where possible, increasing the spread where not. Of course, if there are no buyers, Cantors will keep reducing the spread until there are.