A number of clients have asked me how a Trump presidency could impact property values and real estate markets. Putting aside the politics of the election, real estate is a critical sector of the economy that affects buyers, sellers, renters, landlords and homeowners.
The unexpected election of Donald Trump to the presidency will have profound implications in the United States and around the world. From a high level, a centerpiece of Trump's campaign has been curbing immigration and deporting undocumented immigrants. However, cross-border transactions and international buyers have been key to the bull market in U.S. luxury real estate from coast to coast for many years.
A 2016 study by the National Association of Realtors found that international buyers typically purchase more expensive properties. Furthermore, from April 2015 through March 2016 overseas buyers purchased $102.6 billion of residential real estate with New York being one of the five largest markets for purchases by overseas buyers.
International buyers and investors have been instrumental to the success of new construction projects, including Trump's own endeavors, accounting for approximately 15% of the New York buyers in recent years.
An environment of mass deportations and highly restricted visas could trigger a chain of events that could reduce real estate investment and increase construction costs. The construction labor market is already tight and eliminating millions of workers from this sector could yield labor shortages and impede building activity thereby increasing both labor and construction costs. As a result, developers could bestow the cost implications upon homebuyers or alternatively pull back on projects.
A decrease in the labor pool could also shrink the U.S. economy. A 2015 study by the American Action Forum found that deporting 11.2 million undocumented immigrants would reduce real GDP by $1.6 trillion. A decline in economic activity could cause real estate prices to dip, resulting in higher rental yields and position buy to rent investments as more attractive.
What about interest rates?
The Federal Reserve has signaled a rate increase in December although Dow futures were down 800 points the evening of Trump's election before rebounding in the days that followed. Market volatility could influence the Fed to delay a rate hike extending what has been a stronger than usual real estate market this fall. However, treasury yields have been higher on expectations of tax cuts, infrastructure spending, and inflation, which may lead to higher rates and deficits.
Fortunately, the timing of the presidential election and subsequent results fall in November, traditionally a quieter period on the U.S. real estate calendar.
Will a Trump presidency lift real estate to even greater heights? Once the surprise of the election results wears off, the hope is that there will be a stable real estate framework in which buyers, sellers and renters can best operate. Only time will tell, but it will be interesting to see how everything plays out.
About Platinum Drive Realty
Platinum Drive Realty is a leading real estate firm servicing Westchester County, NY and Connecticut. The firm prides itself on delivering exceptional service to everyone from first time buyers and sellers to experienced homeowners, builders and investors. Platinum Drive Realty was recently named The Inc. 5000's Fastest Growing Real Estate Brokerage in the Tri-State area (NY-NJ-CT) and One of the Fastest Growing Companies in America for three consecutive years (2014, 2015, 2016).
For more information about Platinum Drive Realty, please visit www.platinumdr.com.
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SOURCE Platinum Drive Realty