James Roberts
Partner, Chief Economist, Knight Frank
For the second time this year, we have awoken to discover that the previously unimaginable has happened at the polls. Donald Trump will next year be sworn in as the 45th President of the United States of America. Unlike many Presidents, he will have a friendly Congress to work with, and thus will be in a strong position to pursue his agenda, assuming he keeps the Republicans in the House of Representatives and the Senate on board.
The necessity for co-operation to turn election rhetoric into law is an impending reality shock that the future President will encounter next year.
The reality is that US Presidents are hemmed in by the balances and controls of the constitution. There is also the suspicion that Trump will be a chief executive in the mould of former-President George W Bush – well suited to a speech in front of an audience of Marines, but leaving the day-to-day business of government to the Vice President and advisors. He will also live within a series of political and diplomatic realities that shape the actions of all world leaders. Trump can say he will re-write trade deals, but other countries can reply, “take it or leave it”.
While there has been much discussion over Trump’s lack of experience in government, as a businessman he will be familiar with the sharp consequences of promising and then failing to deliver. This will shape what Trump says and does going forward, as probably even he last week did not expect to have to deliver on his election pronouncements.
The UK and its commercial and residential property markets, ironically could end up beneficiaries of the shock election result. Until now the UK has appeared a political outlier since the Brexit vote, for having turned its back on the economic consensus that favoured large trade blocs. Today Brexit appears to be part of a wider political groundswell that happened first in Britain, has now spread to the US, and next year could reach the Eurozone, as France, Germany, and The Netherlands hold elections. This is turning into global phenomenon, and Britain is re-entering a political mainstream that will ultimately have to compromise with basic reality – as the High Court reminded the UK government last week on Brexit.
Moreover, the high level of volatility we have seen in global investment markets this year is set to continue; not just because of Trump, but also out of concern as to which major economy will be next deliver a bombshell election result. With equities and bonds set to see a rollercoaster ride, and fluctuations in currency values creating opportunities for those willing to invest across borders, prime real estate in safe haven markets will be in demand among investors.
In the global economy, there is now huge pressure on investors to ‘park’ money until stability returns, which is tearing up the rule book on pricing. Trump’s election will extend this trend.
Liam Bailey
Global Head of Research, Knight Frank
The US Election Result creates challenges and opportunities to global property markets. While there is some uncertainty regarding the economic impact of President Trump’s policies, the US will remain the critical global source and destination for property investment flows.
There may be a period of instability in currency markets, which will influence some short term decision making around asset allocation. However, rather like the Brexit vote in the UK the surprise of last night’s result will be likely to be replaced by a more considered view of the implications of the new presidency.
It is important to remember that almost alone among all developed economies the US has largely shaken off the impact of the global financial crisis and has led the way to improved economic growth. The business environment in the US and innovation in business services and technology providers based in the US have helped to drive property market demand globally – it is an incredibly strong platform to build from.
Nicholas Holt
Asia Pacific Head of Research, Knight Frank Asia Pacific:
“The election of Donald Trump as the next President of the United States of America is already having a significant impact on currency and equity markets in the Asia Pacific region.
“Similar to the impact of Brexit, the result of the US presidential election is likely to cause further uncertainty in terms of the global economic recovery and is likely to lead to a rush towards safe haven assets. Along with gold and triple-A rated government bonds, prime real estate in key global city markets is likely to see an uptick in interest.
“The uncertainty around future US policy in relation to trade, immigration, international relations and industry and the subsequent impact on the US growth prospects is also likely to mean that the monetary tightening cycle in the US will come at a slower pace – a lower-for-longer scenario. This will further enhance the attractiveness of prime property in the US and beyond.
“From the perspective of cross-border real estate investors, concerns over the US could spur increasing amounts of interest into markets such as Australia, Japan and Europe – although the weakening of the US dollar could provide opportunities for opportunistic foreign capital to look at real estate in the top-tier US cities at an effective discount.
“The intrinsic qualities of property – that in times of uncertainty it acts as a safe haven, and in times of economic expansion benefits from rental and capital growth – means that despite all the uncertainty of 2016, real estate markets will continue to be active with prime assets in the world’s most resilient cities remaining in significant demand.”
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Matt Whitby
Head of Research & Consulting, Knight Frank Australia:
“Equity markets will fall heavily over the coming days, and it could take some time for volatility to calm down, however I still expect that markets will re-adjust over the coming weeks.
“The election of Donald Trump is likely to have an impact on the growth of Australia’s two major trading partners – Japan and China – and this could have a flow-on into the economy in Australia. The Australian government are clearly going to have to step up on behalf of China and to a lesser extent Japan, and attempt to ensure the rhetoric from Trump over the campaign won’t become reality.
“Clearly, like the Brexit vote, this will create short to medium-term uncertainty in financial markets, capital markets and property markets. Hence we may see some plateauing in commercial and residential price growth, and indeed some downward pressure, over the coming months leading into Christmas.”
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