Greedy when others are fearful: This is your market!

Greedy when others are fearful: This is your market!

Warren Buffett advised us to be greedy when others are fearful. Admittedly, fear is somehow omnipresent, and yet not equally represented in every market. Some are suffering more than others, which is probably also due to the fact that the triggers for the difficult market phase are very specific and concrete.

Residential is the market where I now believe being greedy when everyone else is very fearful is a smart move. Here are my thoughts on it.

Residential Real Estate: Be greedy while others are fearful

Stocks like Vonovia, Aroundtown or other names are currently being penalized. In part rightly so: After years of low to negative interest rates and the opportunity to grow with debt, balance sheets have built up with high levels of debt. Rising interest rates are now making financing more difficult. With a dividend yield of sometimes 8% or even significantly more, a peer comparison on interest rates is actually no longer an issue.

In the end, however, I am convinced that being greedy for the long term is clever now. The fear may have fundamental reasons. However, the fears are disproportionately priced in. Finally, let’s not forget: residential real estate tends to be a market that is relatively defensive and timeless. People always get used to it, and fluctuation should also be comparatively low. In times of rising living costs, not many consumers are necessarily looking for a change of scenery. Let alone a change of residence.

Being anxious because rising interest rates could blow up financing is therefore partly appropriate. But if you are greedy now, you may be able to secure substantial values ​​that can still generate sales and funds from operations over the long term. As well as stable dividends. Whether that’s an 8% dividend yield or more is anyone’s guess. In some cases, however, dividends would be attractive if they remained at half of previous levels over the long term.

Buying a house won’t be easy either…

For me, residential real estate is the market where you can be greedy now while everyone else in the market builds up an irrational fear. In the end, buying a house is not out of fashion either. Just that rising interest rates are likely to change the market sooner or later. After all, due to high real estate prices and rising interest rates, not everyone can afford it anymore.

At the moment I see this applied to real estate stocks and especially in the area of ​​residential real estate. Buying cheap now with a long-term perspective could be a pretty smart move.

Samuel Edwards
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