Initial market shocks are being quelled by leading voices in real estate which suggest that the 'Trump effect' may not only take time to set in, but might not damage the industry's outlook long term.
'In the near term, Trump’s victory is unlikely to be viewed favourably by markets or by our trading partners and investors overseas,' commented Michael Gately, head of real estate research at Barings Bank. 'Longer-term, it is unclear how much of Trump’s agenda will actually be implemented. In this sense, we’re facing a scenario not unlike June’s Brexit vote, and as such, we believe the best approach to investing is to let the initial shock subside and focus on the implications of Trump’s cabinet appointment and policy proposals going forward.'
Colliers International's chief economist, Walter Boettcher, agreed that it was too soon to call one way or the other. 'For commercial property, the key policies that are likely to drive capital flows globally, including both to and from the US, will not be known for some time. Once again, just like after the EU Referendum outcome, we are left with more questions,' he said.
'How isolationist will the US become under Trump? Is the EU-US trade deal dead? Will the US offer a trade deal to the UK so as to keep the UK within the US geopolitical sphere?' Boettcher asked. 'Time will tell, but do not look for any clear indicators until the end of the year and even then, the likelihood is that his policies will only become clear over his first ‘100 days’.'
'In the coming months, we will be paying close attention to Trump’s views on monetary policy, immigration, taxes and foreign policy,' noted Gately. 'Currently, the Fed is telegraphing a very measured approach to rate increases, although Trump has suggested that he may challenge the independence of the Fed going forward, which could impact monetary policy. With regard to immigration and trade, we expect Trump to propose significant reform, though the extent and shape of the reform remain to be seen.'
Caution the 'new normal'
'At the end of the day, the fundamentals underlying the U.S. real estate market are sound. We believe it would take a very significant exogenous shock to derail the market, and Trump’s win—while certainly a shock—is unlikely to prove enough of a shock to sharply reverse that progress, particular given the checks and balances in place,' Gately concluded.
'Global direct property investment activity will continue, due to the sheer weight of global capital, but a slow-down is anticipated, at least until global currencies settle at new levels,' said Boettcher. 'Occupier markets may see increased caution and hesitation by international operators. Once again, this uncertain environment is looking more like the new normal, but businesses and markets will no doubt adapt as they always do.”
Boettcher said he would be keeping a close eye on Trump’s appointments to key positions, and said that economic policies were likely to be 'a committee job'. 'If there is an immediate worry, it will be the social consequences of an electorate that remains deeply divided by race and wealth. For now, we can only monitor events,' he said.
