The UK government is focused on the impact of Brexit, but they may have missed the elephant in the room.
This elephant is the one and only Donald Trump and we at DMZ want to discuss the possible impact to London’s property market. With the global economy on a knife edge and the prospect of an untested property mogul running the world’s most powerful country, could this prove to be another blow to the housing market or provide the catalyst for the London market to explode due to foreign investment?
Many observers see the attraction to Hilary Clinton coming into power as a business as usual. The US economy is currently focussed on the possible Fed interest rate increases, since GDP continues to grow and the unemployment level is gradually falling.
Theresa May’s timeline around Article 50 is still yet to be determined and the pound is continuing to fall to a 31 year low against the Dollar. With the potential of “The Donald” becoming one of the world’s most powerful people, there is some serious conjecture around Americans seeking sanctuary in London permanently.
“Many people are saying to me that if Trump wins, they will leave America,” says Simon Tollit, director at Sotheby’s International Realty. “Whether they actually go through with this is another matter, but it does suggest there will be fear in the market if he wins.”
Moreover, investors who had previously looked to US markets as a safe haven may now turn to the UK property market. “A win for Trump combined with a predicted unstable pound next year does make London look extremely attractive,” Tollit comments. He adds, however, that either a Trump or a Clinton victory could be a win-win for London, “any political change, whoever wins, will cause uncertainty – which in turn causes stagnation as investors naturally look to alternative markets such as London.”
US markets are currently priced for a Trump victory, “A gain in the benchmark for American equity in the three months prior to the vote has seen the incumbent win 86% of the time since 1928. Right now the benchmark is down 3.6%”, according to an analysis by Strategas Research Partners LLC.
Interestingly, Americans only make up only make up around 2-3.5% of the central London market, according to Strutt and Parker. This could be set to grow in the event of ‘President Trump’.
Conversely, Liam Bailey, Knight Frank’s Global Head of Research, points out that the strength of the US economy is a reason for Americans to stay put. “The question is, do Trump or Clinton’s policies risk the American economy?” he asks. “New York and the West coast have been doing very well in attracting inward investment – and the US market is doing well. It saw a much bigger correction in 2008/09 and is far more affordable in terms of property prices versus incomes,” says Bailey.
DMZ is looking forward to the election on November 8th – current polls out of New Hampshire (a crucial swing state) show the race is tied, or even up by 5 points. The really interesting element to this years election compared to others is due to the huge number of undecided and third party voters who Trump hopes will provide him with his very own, ‘Brexit moment’.
Whatever the result, the London property market eagerly awaits!