Global Real Estate: Will Donald Trump Blow it All Up?
KARACHI: So it actually happened, Donald Trump is the elected president of the most powerful nation in the world. There is a definite sense of Deja-Vous about the whole scenario with many voters in Great Britain experiencing the same shock back in June when Britain voted to leave the European Union (Brexit).
World financial markets plunged after the news that Donald Trump would be president. The Dow Jones fell 4 percent, London dropped 2 percent, and the Japanese Nikkei was down by 5.1 percent. It was not all bad news, though, and assets that thrive in times of market upheaval such as gold rose by 3.2 percent. The Mexican Peso has hit a lifetime-low–plunging 13 percent–with a nightmare scenario occurring as the elected president built his hate-filled campaign around building a wall between America and Mexico. This will have a lasting impact on trade relations between the two countries.
What impact will Trump have on global real estate?
The most obvious and immediate impact will be felt between Mexico and the United States. Mexico is the third largest foreign real estate investor in the US with 9 percent of the total sales by foreigners; we can expect this to change drastically as the relationship cools between the two countries. As the Peso weakens investors may see the US as too expensive; especially if the dystopian scenario unfolds where President Trump builds a wall. Of course, it goes both ways, and the US contributes 30 percent to the FDI of Mexico, supported by bilateral investment treaties; which could be removed by Trump.
This is like a second Brexit. There will be significant uncertainty in the market now ahead of a Trump presidency, with many international property investors likely to hold off on any upcoming transactions in the short term.
Elsewhere in the globe, real estate moguls will be shocked by the announcement. According to Forbes, the United States has surged into the top spot for global real estate investors: New York and San Francisco high on the list. But could that all be about to change? Donald Trump has talked about coming down hard on foreign investors striking better deals that will certainly negatively affect real estate investment in the country.
What is the alternative for real estate investors?
In real estate timing is everything. As uncertainty stifles the market, real estate agents may be open to negotiation. It could be time to benefit from the unknown and to drive a hard bargain. Panic can sometimes be a good thing. It can be the difference between 10-20 percent in real estate negotiations. The owner is unsure of how far the market will fall, so he can be convinced that cash in hand is a safe bet.
Many investors are looking once again to the emerging markets as they did shortly after Brexit. Hot on investors’ shortlist are Mexico, the Philippines, and Pakistan. These countries have a shortfall of available housing, house prices are on the rise, and enjoy relative political stability in comparison to some of the more volatile developing nations. Analysts at Lamudi, also note that Indonesia, Sri Lanka, and Bangladesh, are on the up, but present a riskier profile than the formerly mentioned countries.
Investors should seek to achieve a balanced portfolio. With extensive uncertainty caused by Donald Trump’s election, the United States will be out of bounds for many, but London, Paris, coupled with the rising stars in the emerging markets will be enough to secure long term return on investment targets; that is of course as George Taylor said in Planet of the Apes they don’t “blow it all up”.