The cycle hasn’t turned yet. But the smart money is already buying.
The old saying goes that you should be greedy when others are being fearful (and fearful when others are greedy.)
Right now, if you had to take the pulse of the herd, you’d have to say that the general vibe is fearful.
Interest rate hikes are still being digested, and there’s possibly more on the way. Property prices have fallen and are still falling in most places. Consumers are bunkering down and there’s a good chance we’re headed for recession.
So yeah, spooky vibes.
So is anyone being greedy?
Well, how about Stockland, one of the largest property developers in the country? They’re betting big and buying big:
Stockland picked the top of the housing cycle in 2021 and has kept its powder dry since. Now, with prices falling and buyers nervous, CEO Tarun Gupta is changing course.
… Gupta says Stockland picked the top of the housing cycle in 2021 and has been cautious ever since; for example, it hasn’t acquired much in the way of new land for residential developments since September 2021.
But in a classic contrarian move, Gupta is now putting his foot down. He’s planning to launch 15 master-planned communities over the next 18 months, and on Tuesday announced Stockland has extended its relationship with Mitsubishi Estate Asia, with the pair aiming to replenish Stockland’s pipeline of potential projects over the next couple of years.
The theory here is that Stockland will look past the cyclical housing downturn and focus on the structural positives for the market.
“We’re going into this cycle with chronic housing undersupply – we’ve got rents rising because of it. Net overseas migration is going to exponentially increase compared to the last three years, and we’ve got high employment levels, even though the employment market is softening a little bit,” Gupta says.
It’s a big bet, and it will obviously be a while before the housing clouds clear. But the fact Gupta correctly picked the top of the cycle, and Stockland’s focus on the affordable end of the market, should provide investors with confidence the group can ride through the storm and into the sunshine.
Exactly. Look at the structural factors he’s pointing to.
This will be around for a long time after the mood in the market has turned, fickle thing that it is.
Property’s fundamentals are sound. Amazing even.
If had Gupta’s guns – if I had that much capital behind me – I’d be buying up big too.
We can let go of the idea that property is in for any sort of crash. It didn’t happen. It’s not happening.
And sure, maybe prices will run a little further south. If the RBA gives us another couple of rate hikes as expected, they almost certainly will.
But on the other side of that, the clouds will clear, and we’ll al see that the outlook for property remains exceptionally solid.
If it’s not time to be greedy, it’s definitely time to start thinking greedy.