Well, you all called it.
DealMakerz conducted a poll the day before the U.S election and the overwhelming majority correctly predicted that Donald J. Trump would be the next president of the United States.
The poll went out to the DMZ community which includes London’s leading property developers, estate agents, financiers, investors, buyers, journalists plus many more. Now we know “The Donald” will be the next POTUS, we investigate whether U.S buyers will flock to London and what unintended consequences may emerge from Trump’s aggressive campaign.
The initial reaction from analysts was positive. Anthony Codling, Managing Director of UK Residential Property at Jefferies said, “our favourite new build development in Nine Elms, which is also the site of the new U.S Embassy, may see an uptick in demand should disillusioned wealthy and mobile U.S citizens seek relocation”. Codling went on to cite potential winners from the Trump election as “the Berkeley Group and London centric estate agents.”
Nick Davies, Head of Residential Development at agency Stirling Ackroyd, pointed to the continuing currency play on offer for dollar buyers after sterling’s continued post-Brexit crash, “There are great deals available in the London market for buyers from across the Atlantic…buyers using the dollar will find homes in London are almost 10 per cent cheaper than a year ago”.
Our friends across the pond seem relaxed about any potential exodus and point to the current macroeconomic ‘buyer-friendly’ conditions. Jonathan Miller, CEO of Manhattan based Real Estate Consultancy Miller Samuel said, “with the continuation of near record-low interest rates, I don’t see the election results as having much of an impact to the US housing market after the short-term jitters pass”.
Michael Gately, Head of Real Estate Research at U.S-based investment manager Barings, said “it would take a very significant exogenous shock to derail the market, and Trump’s win is unlikely to prove enough of a shock to sharply reverse that progress”.
Trump has proposed a “Tax Reform That Will Make America Great Again” which lowers corporate tax to 15%, benefitting a number of players in the U.S Real Estate market, including himself. Also on the side of the U.S is the affordability factor. London’s housing market was once the poor relation of New York’s, but rapid house price growth in the UK capital over the past 5 years has made it more unaffordable than its American rival, according to easyProperty.
However, The Donald’s offensive campaign comments about religious minorities may dissuade foreign investors from buying in a Trump-led America. The President-elect called for a “total and complete shutdown” of U.S borders to Muslims in a policy document, which isn’t exactly rolling out the red carpet to huge Real Estate investors in the UAE, Saudi Arabia or the thousands of UHNWI’s from the region looking for a safe spot to park and grow their capital.
This provocative rhetoric may have just been for show, as the statement on ‘banning Muslims’ has now disappeared from Trumps website. His company have also announced that new hotels built by the organisation will not go under the Trump trademark, but fall into a newly formed ‘Scion’ brand.
DMZ explored the potential impact of President Trump on UK property last week, pointing out that Americans only make up around 2-3.5% of the central London market. We think that a nominal proportion of U.S buyers will flock to London on a permanent basis, but the lasting effect from Trump’s aggressive campaigning could prove a key factor in pushing global buyers to pivot from established U.S property markets like New York to London.
Even in a post-Brexit UK, London Real Estate remains extremely appealing. Real Estate advisors CBRE calculated that Middle East investment into U.S Real Estate hit $5.1 Billion last year, with London hitting around $2.7 Billion.
Unless President Trump reneges on a lot of policy pledges, DMZ expects these numbers to change significantly over the next 12-18 months.