On the 20th January next year, Donald Trump will take his place as the 45th President of the United States. This highly contentious and indeed close election which concluded in the early hours of this morning has divided the country almost straight down the middle. Hilary Clinton led the polls through the majority of the campaign and the election of Donald Trump has come as a surprise to many. The result seems to echo the increasingly anti-establishment shift in public opinion as also evidenced in the Brexit vote earlier this year.
Initially, like with Brexit, it is likely that the market reacts quite violently, until some element of certainty comes to the fore. It will take some time to determine exactly how Trump’s policies and position will impact the International Property arena, but based on his election ‘promises’, we think that the landscape for the international property market might change and shift in the following ways.
1. Less outward investment into the Caribbean, South & Central America
The South American, Central American and Caribbean second home markets have been reliant upon American investors for many years. Trump is encouraging Americans to keep their money at home. The cancellation of international trade deals, in particular with its neighbours, may also make it less viable for Americans to invest outside of the States. This will provide potential opportunities for other international touristic investors looking to capitalise on an increase in American tourists who will not be competing simultaneously in the investment arena.
2. Incentives for those looking to ‘Invest’ in the USA
Donald Trump has made it clear throughout the run up to the election that he will not tolerate people living off the state if they have no right to be in the country. On the other hand, he seems ready to welcome those who are prepared to substantially invest in the country. We think that once Trump has dealt with removing those he classes as ‘undesirables’ that the next step will be to attract the desirables. So – watch this space for potentially exciting investment opportunities in the States in late 2017.
3. Tourism and Access to the USA
For those looking to invest in touristic products in the USA, Trump’s election could change the playing field somewhat. It is likely that restrictions on travel will tighten and there may be a reduction in visa issuance. So, if you do decide to invest in a touristic product or rental product in the USA, we recommend that you focus your attention on projects / properties which will attract the attention of the domestic market and are not reliant upon foreigners to make up a substantial element of the tourist market. We also recommend sticking with ‘luxury’ product, where the market is less likely to be impacted by any tightening of travel regulations and visa issuance.
4. Tax Incentives to Increase Appeal of US Property
Throughout his campaign Trump has declared his intention to lower taxes. If lower taxes were applied relating to property ownership in addition to general income tax etc, then this would likely open up the market and increase the number of US residents able to buy as well as their target property price. Assuming that no prohibitive withholding taxes were implemented for foreigners, this could also increase foreign investment into the US.
5. Improved Public Infrastructure to Impact House Prices
The intention of Donald Trump to increase spending on the development of infrastructure and public buildings such as schools and hospitals could impact property prices in the US in a positive manner. In today’s victory speech, Trump announced: “We are going to fix our inner cities, and rebuild our highways, bridges, tunnels, airports, schools, hospitals. We’re going to rebuild our infrastructure, and we will put millions of our people to work as we rebuild it.” As neighbourhoods are regenerated and new facilities introduced, this will impact house prices. Depending on the initiative this could be in positive and negative ways. Airports might have a tendency to cause a negative impact assuming that they increase traffic and noise, while the addition of schools and hospitals is likely to increase property values.
6. Currency Instability
The uncertainty surrounding the reality of Donald Trump’s political agenda versus the rhetoric that we have heard throughout the election contest has already had repercussions in the Forex markets. The Mexican Peso has taken one of the hardest hits off the back of Trump’s campaign pledge to build a wall between the two countries. It is likely that there will be further currency instability over the coming months while Trumps intended actions become clear. As we advise with any property purchase which is outside your usual currency, it is worth fixing the currency to minimise your risk if you are not willing to spend more if the markets don’t go your way.
We will keep an eye on the situation as it develops and as the presidential policy of Donald Trump becomes more clear over the coming weeks and months and keep you up to date with its potential impact on the international property market.