Housing market looks a one-way bet right now
Thursday March 29 2007
The product allows Delta Index clients to punt on which way they think Irish residential property is heading and, so far, all three indices have slumped.
The company provides indices for the value of residential property in Dublin, Nationwide and Outside of Dublin.
The price of buying the Dublin index has fallen from 446 to 440, nationally the quote has dropped from 325 to 320, and the price of getting your foot on the virtual property ladder outside of Dublin is a mere 272, compared to 278 when trading began.
Each unit represents €1,000, so anyone who sold the Dublin market at 446 when trading opened is up six times their stake.
"In fairness, the trades have been relatively small, but it's interesting that the amount of people who want to short the market outnumber the housing bulls by about three to one overall," says Conor O'Neill, Delta Index managing director.
He adds that the pessimists are not quite as much in the ascendancy in Dublin where bear trades to bull is running at about 4:3.
Delta is happy with the recent market volatility, as much of its business is done making a margin on indices or commodities trading which attract healthy two-way interest.
"I sometimes think that the Irish psychology won't allow shorting individual ISEQ companies," he continues.
"It's considered bad form, tantamount to murder."
Delta will use the ESRI's Annual House Price Survey for 2007 to settle trades on its housing index, and O'Neill says to watch out for next week's 'Election Index' launch which will allow clients test their political antennae by predicting the results of this year's election.
With strong rumours of a FG-led government taking the knife to stamp duty, what chance a hedging opportunity involving both the House Price and Election Index?
