Is Cheap Real Estate Investment Only a Dream? – Chart of the Day

Ship and buildings in Hainan, China (
  • Real estate investment can be attractive in times of crisis, especially if inflation rises.
  • The central bank policies are supporting inflation.
  • Real estate stocks traded on stock exchanges fell sharply.
  • But the index neither in the U.S., nor Europe nor Asia has fallen very much in the long term.
  • If the price has fallen, you may not be sure it is cheap.


Real Estate Investment in Times of Crisis

What does the crisis mean for real estate investment? Are real estate objects or real estate stocks cheap? This could be a very important investment issue in the coming years. Many experts expect inflation to rise because of the crisis. Although, prices may fall in the short term as many people remain out of work. Or they will save more building reserves for similar crises.

But later, in 1-3 years, that may change. There may be a rise in prices, a devaluation of paper money. A more severe negative real interest rate than at present. (Because of the huge expansion of central banks’ money supply and the necessary inflating of debts.) The traditional inflation hedges are real assets, like real estate investment, or precious metals. Possibly farmland, machinery, also other commodity market assets. (For example, there are countries where industrial copper is also used as an inflation hedge.) Equities can also provide protection against inflation if the company can pass on price increases to consumers.

4 Real Estate Investment Types

You can invest in real estate in various ways. It is useful to know the following main instruments:

Small house to buy


Direct real estate investment

The investor buys an apartment, a retail store, a building plot, farmland. But after the buy, there are many things to do. Various types of costs, tasks, and obligations may arise. Some property management is necessary.

Real estate landscape.


Real estate funds, trusts

The real estate properties are purchased by a qualified wealth manager of the fund. The specialists also perform property management tasks. (Or entrust it to an outside company.) The manager charges a fee for his work, but the investor has no obligations. It is a passive investment.

Construction, concrete mixer


Real estate market stocks

Shares of many real estate companies are traded on stock exchanges. Some operate in the construction industry, others prefer to rent buildings and apartments in the long run. Still, others speculate more on price increases. It is also common the combination of several activities in the same company.

School. REITs can buy school buildings.



The REIT (real estate investment trust) is a kind of transition between a corporation and an investment fund. They issue shares, but their operation is like that of funds. REITs focus on income-producing real estate investments. They usually pay high dividends.

What Are Cheap and Expensive Stocks Like?

Our chart shows three real estate stock indices, one American, one German, and one Asian-Pacific, since the fall of 2016. What’s interesting about them is that it looks like all three fell a lot in March. But the German index is still nearly ten percent higher than at the end of 2016. It spent 2016 and 2017 below the actual level (look at the red line). The U.S. index barely changed, and the Asian region index fell only nine percent during this period.

US S&P 500 Real Estate (S5REAS), German RX Real Estate TR and Nasdaq ARPA (Asian, Pacific) Real Estate Indices.
US S&P 500 Real Estate (S5REAS), German RX Real Estate TR and Nasdaq ARPA (Asian, Pacific) Real Estate Indices. Click for higher resolution. (


This means that while these real estate stocks have fallen sharply this year, they may not be cheap yet. It would be a mistake to buy only because prices are much lower than at the February peak. Perhaps they were too expensive in February?

Lack of Alternatives and Visible Risks

But that doesn’t mean a real estate stock isn’t a good investment either. Real estate investment could be favorable if inflation rises. But since the beginning and spring of 2019, they have also been well affected by the policy of further easing by central banks. (Low-interest rates, bond-buying programs, growing money supply.) And now, because of the crisis, central banks are pouring so much fresh money into the market. New historical real estate stock records would come as no surprise.

Maybe inflation won’t go up much at the end. But a safe investment alternative with a positive real interest rate is mission impossible on the market in the coming years. This is also enough for the rise of real assets.

But let’s not forget the risks. In the case of a prolonged, deep crisis, the situation in the real estate market could be much worse. Tenants may become insolvent, buildings remain empty. Constructions could come to a halt, real estate companies’ profits could disappear. A wave of bankruptcies may follow.

See our other articles on the chances of inflation and negative real interest rate. The behavior of the stock market and precious metals after the crash, in the following list:


  • More real estate investment indices on


I’m not a certified financial advisor nor a certified financial analyst, accountant nor lawyer. The contents on my site and in my posts are for informational and entertainment purposes and reflecting my collection of data, ideas, opinions. Please, make your proper research or consult your advisors before making any investment or financial or legal decisions.


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