Grosvenor closes first Japanese property derivatives deal

International property company Grosvenor Group has carried out the first Japanese property derivatives trade based on the IPD Index for Japan, a two-year property total-return swap with the Royal Bank of Scotland.

The IPD Japan Monthly Indicator is one of a range of international indexes produced by London-based International Property Databank (IPD). The Japanese deal follows Grosvenor’s Australian property derivatives trade in May done with ABN Amro, the first in that country’s market.

The rise of property derivatives in Japan, the world’s second-largest real estate market, is likely to be a significant breakthrough for the industry, said Grosvenor. The implementation of uniform standards for assessing property values by the Japanese government in July further increases the potential for development of the Japanese property derivatives market, added the company.

IPD Asia-Pacific director Kevin Swaddle said: “The fact that the first property derivatives trade in Japan will be based on the IPD Japan Monthly Indicator reflects the international confidence in the IPD indexes. They have formed the basis of trades in Australia, France, Germany, Japan and the UK, with several more countries said to be imminent.”

Property derivatives allow investors to quickly buy or sell exposure to the real estate market, without much of the costs involved in buying and selling physical property, such as agents’ and legal fees.