How will Trump’s Presidency Affect the Real Estate Market?
It’s the question everyone has been asking me this week, so I decided to take a stab at an answer.
Trump (and Clinton’s) campaign were both characterized by rubbishing the others reputation and determinedly avoiding any kind of policy detail. So we now have a President of the most powerful nation on earth, who actually doesn’t have any set in stone ideas, policy, or overarching philosophy. Donald Trump has been a Republican, then a Democrat, then Independent, then a Republican again (https://en.wikipedia.org/wiki/Donald_Trump#Involvement_in_politics.2C_1988.E2.80.932015 ). However, as a republican president, we do have some general ideas on which way his policy will have to lie, to get things through republican dominated congress and senate.
So what do we know?
- He’s a real estate investor, like us. This is probably the most important aspect for you and I. He’s one of us. He understands how we think, how we make money, and what issues affect us. Whether it’s a case of easing on taxes, or something else, this can only be positive.
- He understands the issues surrounding the crash of 2008, and what needs to be done to make sure this doesn’t happen again. While his hands are largely tied with regards to the privately owned federal reserve bank, Trump knows that while the crash was caused partly by mis-regulation, he also knows that the market has been hobbled ever since by the reactive over-regulation of the banking industry that followed the crash. A balancing out of this will allow more real estate lending and more money into the industry, pushing prices up but tempered by the likely small but steady increase in interest rates and inflation that will cycle through his first term in office.
- He’s likely to cut tax and cut spending. As a ‘small government’ republican, he’s likely to reduce entitlements, although this is by no means certain despite his campaign rhetoric. He’s flip flopped on tax, and currently proposes a top rate of tax of 25% – http://www.marketwatch.com/story/donald-trump-raises-his-proposed-top-tax-rate-for-individuals-2016-08-08 – although he also alluded to a top corporation tax of 15% which is better. This will mean he’ll have to cut somewhere – I’d love to see him cutting corporate welfare (by far the most wasteful welfare expenditure in USA – http://thinkbynumbers.org/government-spending/corporate-welfare/corporate-vs-social-welfare/). Trump, unlike Hilary Clinton is less beholden to corporate sponsorship and therefor could be the ideal candidate to focus on this. Reducing spend on Nato by forcing the other countries to cough up a larger share will also make a much bigger difference than cutting entitlements, (which I suspect will be very difficult to reduce substantially without a lot of pushback). However with unemployment at record lows in Buffalo, and our focus on working tenants, a reduction in Welfare entitlements is likely to have a marginal negative effect on our investments here.
- He wants to Reduce Immigration.
We have a double-edged sword with this issue. Most of the negative affects will hit cross border businesses in Southern USA near the Mexican border. However, Buffalo has long been one of the major beneficiaries of USA refugee intake, especially from SE Asia. It has not only increased the population and tax base, but the people are generally law abiding, family oriented communities. They make great tenants and often end up opening local businesses. Reducing the number of new arrivals, while it wouldn’t have a negative affect, would have a less positive affect. On the plus side, a lower supply of ‘cheap’ foreign labour would likely lead to an increase in salaries as there would be less people willing to do low paid work, perhaps allowing for larger rent increases over the longer term.
All in all, while like most of you I’d rather have seen Gary Johnson in the White House, realistically id rather, on balance, be in the hands of a seasoned real estate investor like Trump than a career politician like his adversary.