Guest commentary by Sven Rischko, founder and CEO of Kronos Advisory GmbH
Published in Leadersnet Austria | January 2024
The majority of investors make the same mistakes over and over again by following the crowd. This applies both to the investments they make and, more importantly, to avoiding investments that are currently unpopular. Successful investing is fundamentally very simple, even without speculating on a potential new future trend (crypto, longevity, space, blockchain, etc.).
An investment with the following five characteristics will always be successful in the medium to long term:
- There is a definite need
- Demand is growing or at least remaining the same
- Supply is lower than demand
- The offer cannot be increased at will
- The investment provides an inflation-protected cash flow
When an asset class that shares all of the above characteristics is then predominantly reported negatively in the mass media, at least 90 percent of all investors miss this “once in a lifetime” opportunity, only to years later either complain or criticize the ever-growing wealth gap within society. Instead of admitting their own mistakes, learning from them, and changing their own investment behavior, they then demand wealth taxes on those who don’t behave like lemmings when investing and can therefore increase their wealth accordingly.
Residential real estate projects as a current example
This is precisely the situation we are currently observing. Residential real estate inherently fulfills all five of the above characteristics. The “once in a lifetime” opportunity currently lies in investments in new residential real estate projects. The following facts apply:
- The need for additional housing has not been fully met by new housing in recent years.
- Rising construction costs and interest rates have led to many projects either being halted or postponed altogether. This will lead to a massive discrepancy between supply and demand over the next two to three years.
- Some developers (see e.g. Signa) have worked with such high leverage that they are now either insolvent or have to sell projects through distress sales (at correspondingly low prices).
The summary is
According to all economic “laws” governing price development, prices, both purchase prices and especially rental prices, will rise significantly. At the same time, purchase prices for projects have fallen significantly in recent months. As a “sweetener,” everything indicates that interest rates—and thus financing costs—will not rise further, but rather fall significantly. The only important thing is that investors, on the one hand, understand and exploit this opportunity and, on the other, do not invest in projects from “distressed” developers.
We at Kronos Advisory GmbH, recently awarded as the best multi-family DACH, are happy to advise you.