Investing in residential property without actually buying the property could become a reality within a few months if the ASX has anything o do with it. In a world first, the ASX is considering allowing derivative trading on residential property based on indices compiled by the Rismark/RP data. This will allow investors to gain exposure to the residential property market without holding property.

Banks could hedge against their mortgage books, those that are bearish can short sell and those that think the market is going to move up could go long and even utilise the trade while they are saving for a property to ensure that if the market does move up, they won’t be left behind while they had been sitting out of the market saving for a deposit.

The down side though is that contract owners could end up owing more that what the first invested.

So is this good for property investors… I’m not really sure… for those that have never liked residential property investment; it will be interesting to see if they trade these derivatives… for those that have always liked bricks and mortar property investing, why you would then invest in a derivative contract. It will be interesting to se if this comes to fruition and what happens next.

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