In a survey conducted at a Seminar of Investment Property Databank (IPD) on Japanese property derivatives in 2007, only 5% of the participants claimed that they knew “a lot” about derivatives. Around 45% said they knew “a little,” 40% said “not much,” while 9% admitted they knew nothing at all. The seminar was attended by 300 Japanese real estate investors, portfolio managers, developers and government officials. Moreover, 64%said they came from institutions thatwould be able to use property derivatives in future, with 52%of those expecting their company to do so in the near future.
There are some obvious and some less obvious hurdles that made and still make the quick establishment of a liquid property derivative market difficult. Some of them depend on the respective jurisdiction, while others are inherent in the property market. Previous article lists the most important hurdles. In addition, to start the property derivatives market, a sufficient number of counterparties must be found to build liquidity.
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