A property derivative is a financial derivative whose value is derived from the value of an underlying real estate asset. In practice, because real estate assets fall victim to market inefficiencies and are hard to accurately price, property derivative contracts are typically written based on a real estate property index. In turn, the real estate property index attempts to aggregate real estate market information to provide a more accurate representation of underlying real estate asset performance.

Property derivatives usually take the form of a total return swap or forward contract, or can adopt a funded format where the property derivative is embedded into a bond or note structure. Under the total return swap or forward contract the parties will usually take contrary positions on the price movements of a property index.