Should you be greedy when other investors are fearful?

Buy counter cyclically. That’s what many “experts” are suggesting. 

In fact, Warren Buffet is famous for saying: “Be greedy when others are fearful and be fearful when others are greedy.” 

But this strategy is not foolproof.

Sometimes it works and sometimes it doesn’t.

Let me explain…

Currently, after massive price growth for over 5 years, the Sydney and Melbourne property markets are taking a well-deserved breather.

The news of falling auction clearance rates, stagnant real estate prices and a possible market top is making some potential buyers worried.

They see difficult times ahead. 

They are waiting in the sidelines for the picture to become clearer.

And while they are fearful, other strategic investors are taking advantage of the softer market to buy the type of property that 6 months ago they would have had to fight off strong competition at auction to acquire.

These investors understand that when they look back in five or ten years’ time they’ll wonder how they bought these investment grade properties so cheaply.

They know that economic growth, jobs growth, population growth and gentrification surrounding their property will underpin its long term growth.

I guess they’re being greedy while others are fearful and they are creating their own good fortune.

However, you can’t always rely on this strategy…

“Buy when others are fearful” doesn’t always work.

Ask those who bought properties in Perth or Darwin or in many regional locations over the last few years, believing these markets had bottomed.

And it’s much the same for those who looked for distressed properties or chased the next hot spot. 

Some of these markets haven’t yet bottomed.

Other will remain flat for a long, long time before they start rising again.

You see…markets don’t suddenly rise after they bottom.

They usually plateau for a number of years as vendors slowly put more properties on the market when they realise that buyers are returning.

And some mining towns and regional markets will not have another growth spurt for decades – they have more properties than there are people who will ever want to live in them.

This type of speculating has meant that many buyers missed out on the strong growth experienced in locations like our two big capital cities which were underpinned by multiple growth drivers

The bottom line:

We are moving into the next phase of the property cycle and at times of change it is common to get mixed signals and conflicting messages from the “expert” commentators.

Those property investors who follow a proven strategy, one that has worked in the long term over multiple cycles will do well as they become greedy when others are fearful.

WHAT DOES THIS MEAN FOR YOU?

If you’re looking for independent advice about property  no one can help you quite like the independent property investment strategists at Metropole.  

Remember the multi award winning team of property investment strategists at Metropole have no properties to sell, so their advice is unbiased.

Whether you are home buyer or a beginner or a seasoned property investor, we would love to help you formulate an investment strategy or do a review of your existing portfolio, and help you take your property investment to the next level.

Please click here to organise a time for a chat. Or call us on 1300 20 30 30.

When you attend our offices in Melbourne, Sydney or Brisbane you will receive a free copy of my latest 2 x DVD program Building Wealth through Property Investment in the new Economy valued at $49

About Michael Yardney Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.