Estimated impact of Donald Trump’s Presidency on the U.S. Real Estate Market

Why Trump’s rise is not bad for all the U.S. sectors?

When the results of the just concluded U.S. presidential election was declared on 8th November, 2016, there was a general sense of despair. A fear of the unknown loomed large as Donald Trump, an “outsider” in his own party shook the world by ascending to the position of the President of the U.S. He proved almost every forecast wrong.

The despondency arose because Trump had made some outrageous and obnoxious comments throughout the bitterly fought election campaign and there was also an apparent lack of clarity on his policies and his vision for the various sectors of the U.S. economy. When people were expecting an American socio-economic resurgence after years of muted growth post the 2008 recession that robbed America of its attractiveness somewhat, very few believed Trump would be the man who could lead the change.

However, some experts have predicted that the negative sentiment in the market and lack of a clear policy could actually turn into a boon for the U.S. real estate market, which still remains a powerful lever in the U.S. economy.

How can the U.S. real estate benefit?

Increased spending on infrastructure: Fall in taxes could improve the mood. He has also promised to reduce taxes and increase expenditure on infrastructure development. In the short term, this could act as a stimulus and increase discretionary spending. Also, lack of a clear direction could mean that many investors would channel their savings into real estate which, despite being a cyclical sector takes longer to react to market forces and is usually safer than other investments. Also, the steady rise in rates of rent has made this a viable investment option and the prices are expected to rise under Trump as well. Many would withdraw parked money from secondary markets and make them flow into real estate.

U.S. protectionist policies: While U.S. protectionist policies could destabilize the global economy and invoke similar actions from other large economies like China, it would mean that many people would invest in the real estate including foreigners. Trump plans to reserve U.S. jobs for American citizens by increasing the trade tariffs but these could have a detrimental impact on the economy in the long run. But this means that more jobs would be set up within the country and some big American companies who had shifted base to other countries to reduce tax expenses would return. That would start a race for properties within the U.S. which can only bode well for the real estate sector.

The Mortgage lending norms could be relaxed: The current stringent lending norms for homes, et al could be relaxed and mortgage underwriting could become less stringent. This could reignite demand in the real estate market and bring in more liquidity. However, if the government is not careful, these loans could once again turn into bad loans and severely impact the economy.

Mr. Trump’s connection to real estate could also create a positive sentiment. He is known to be a shrewd businessman and one can hope that he would actually move away from some of the truculent positions he had taken earlier during the election campaigning.

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