The US election would possibly be the second biggest political events in 2016 (The 1st one would probably be BREXIT). Although political pundits were looking forward to a different result, Trump’s election was a complete contrast to their predictions.
Like many of its Right-wing counterparts in global politics, Trump is someone who splits the public discourses in two parts- people either adore him as the new harbinger of change or abhor him for his rhetoric that were often tangential to the widely accepted norms of political discourses.
Barring the lexicon of everyday politics, which is expected to continue for some more time, Trump’s election & his anticipated policies might have some significant impact on the economic outlook of USA.
Impact on US Real Estate!
Trump is also a real estate industrialist, who owns a multi- billion-dollar empire. He is one of the few US presidents that have a proven expertise in the business world. & hence it is natural that his election to the post will send positive vibe to the real estate industry. Industry insiders are constantly contemplating about what a possible Trump election would correspond to the wider implication to the American & global real estate industry.
Substantial part of the Trump’s presidential campaign was centered around building a host of infrastructure projects such as roadways, bridges, airports logistic links & new urban landscapes. The elected president talked about spending a whopping USD 1 trillion on infrastructure. Similarly, he had talked about possible tax cuts. Investment in infrastructure in conjunction with tax cuts will induce more spending & should catalyze towards increased housing demand. Investment in infrastructure will also create more jobs thereby adding to further demand.
Trump’s stand to dismantle the Dodge & Frank economics can go a long way in infusing more confidence in the US real estate & overhaul the existing financing & banking systems. This should result into increased activities in smaller banks & hence can ensure new funding streams for the developer community. A rise in developer funding would ideally translate into some more vibrant sentiments in the real estate industry.
Mortgage Market
The immediate impact of Trump’s election has not been salubrious to the mortgage rates in USA. Many investors have divested from the USA bonds and are investing in Japan & European sovereign bonds. This has pushed the rates at 4%, thereby increasing the cost of borrowing in USA. Likewise, the investments in infrastructure will primarily be deficit spending & can again push the mortgage rates up in the midterm & induce a slowdown the volume & price growth of residential properties.
Political Concerns
Trump’s possible tough stand on immigration policy could give major blow to the future of real estate in USA. Similarly, Trump’s stated stand on increasing the tariff rates on imported goods & other policies with regards to a tougher trade policies can further entail negative impact on the real estate industry in USA. Such stands might compel many international investors to pull in their horns & be careful with their investment in USA.
After all, the investment dynamics directly corresponds to the degree of confidence associated with a destination. Outrageous sentiments were norm during the US election & if few of them could finally cascade into upcoming policy making, it will add certain degree of non-linearity to an otherwise calm business atmosphere. This non-linearity & contingencies could be inimical to the health of American real estate industry.
However, experts believe that the likelihood of political hyperboles translating into real politics is generally very minimal. History testifies the fact that high voltage political rhetoric is not new to politics. But generally, when the leader elect enters the political arena, such agendas are dropped like a piece of hot coal.
Conclusion
At present Trump’s final stands are uncertain & unless clarity is not achieved on various policies, the international perception might linger in doldrums for some more time.
Hence it is too early to pass on a judgement about what would be the length & depth of impact on real estate. A lot would also depend on how the strategic priorities of the Trump administration unfolds in the near time. At present, there appears to be two diametrically opposite ideas. While the emphasis on infrastructure spending could be a major boost to the real estate industry, his protectionist policies might make the business environment highly uncertain & could be inimical to the real estate.
