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A lot of people are talking about a property bubble in London and I was wondering: how could you short the property market and bet on a crash? Is there any obvious way? Basically, how could someone make money from the property prices in London going down?

I've been reading about it, but nobody seems to agree on anything.

Some references:

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    Your first link seems to have a good answer: "You can short the House Price Index on IG Index - either regional or London index. " – Chris Degnen Mar 22 '14 at 19:11
  • Thanks, here is what I found: "We offer bets on the average house price for the UK as a whole, based on the Halifax house price survey." IG: House prices bet details – lambda Mar 23 '14 at 10:47
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    The market can stay irrational etc – AakashM Mar 25 '14 at 16:00
  • Be sure you know the exact market you’re dealing with. London is a big place, and the housing market in the outer boroughs is more like the rest of south-east England than it's like the prime central and western areas that get the headlines. – Mike Scott Oct 18 '17 at 19:57
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Well,

Taking a short position directly in real estate is impossible because it's not a fungible asset, so the only way to do it is to trade in its derivatives - Investment Fund Stock, indexes and commodities correlated to the real estate market (for example, materials related to construction).

It's hard to find those because real estate funds usually don't issue securities and rely on investment made directly with them. Another factor should be that those who actually do have issued securities aren't usually popular enough for dealers and Market Makers to invest in it, who make it possible to take a short position in exchange for some spread.

So what you can do is, you can go through all the existing real estate funds and find out if any of them has a broker that let's you short it, in other words which one of them has securities in the financial market you can buy or sell.

One other option is looking for real estate/property derivatives, like this particular example.

Personally, I would try to computationally find other securities that may in some way correlate with the real estate market, even if they look a bit far fetched to be related like commodities and stock from companies in construction and real estate management, etc. and trade those because these have in most of the cases more liquidity.

Hope this answers your question!

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While I am not an advocate of shorting anything (unlimited downside, capped upside), you can:

  • Short real estate investors' and developers' stocks and bonds
  • Buy CDS on RMBS backed by London properties
  • Sell London properties if you own any
  • Place spread bets on the house price index

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