Is it time to 'be greedy when others are fearful'?

It’s no surprise that so much attention in recent weeks has been on the Middle East, and the uncertainty about how widespread the effects may become.

I think most of us accept that the conflict will eventually come to an end, likely sooner rather than later. What we are all trying to understand is the impact on the global economy, particularly through rising fuel costs.

As always, there are a wide range of views, from those expecting only a minor economic impact to others forecasting a global recession.

Not surprisingly, this uncertainty has seen consumer confidence fall to some of its lowest levels in the past 40 years. It is not simply about the war itself, but more specifically about petrol prices.

The key concern remains oil production and delivery, particularly refining capacity and supply routes such as the Strait of Hormuz. It is important to remember that around 80 per cent of the world’s oil is transported through other channels, meaning only around 20 per cent is directly exposed to disruption, with other regions attempting to absorb the shortfall.

Wednesday’s (22 April) announcement that the ceasefire would be extended for an unspecified amount of time did little to suggest the conflict is going to be resolved permanently any time soon.

We also know that virtually every product on the planet is, in some way, influenced by fuel costs. The fear of rising fuel is that it will trigger higher inflation that, in turn, is controlled by reserve banks through higher interest rates. This is where the real financial fear lies.

Building costs propelling established homes

When uncertainty increases, consumers tend to pause and do nothing. Fear and speculation often lead to hesitation, particularly around large financial decisions such as real estate. People focus on the present rather than projecting forward.

In real estate, what we know has occurred is that there has been an immediate impact on housing construction.

Building costs have risen sharply, placing developers under pressure. Many construction contracts are now being renegotiated, with some builders unable to honour fixed-price agreements, or projects being delayed or cancelled altogether.

As a result, some developments are being shelved entirely, while others are being repriced to reflect higher costs. At the same time, some financiers are withdrawing funding from projects they now consider unviable.

The outcome is clear: higher building costs will ultimately flow through into higher property prices.

More importantly, reduced new supply will worsen the existing housing shortage. This will push more buyers into the established housing market, increasing competition and driving prices higher. It will also increase demand in the rental market.

Following the crowd an investment misstep

In short, fewer new homes mean less choice, higher prices, and greater pressure across both the sales and rental markets.

What is happening in the Middle East is, therefore, not just a short-term inflation or interest rate story; it has far deeper implications for housing supply, affordability and investment opportunity.

For property investors, this creates a critical decision point.

It is important not to be driven into inaction by uncertainty, but to recognise that delaying decisions may result in even higher prices and reduced opportunity as supply tightens further – at the very time that we need more investors to meet the rising volume of people looking for rentals in the market.

It takes some courage but remember what the world’s greatest investor, Warren Buffett, has used as one of his founding principles of investing: Be fearful when others are greedy, and greedy when others are fearful.