Last week, the world looked on, gobsmacked, as Donald Trump became the 45th President of the United States. The economic policies Trump is expected to implement will have significant implications, not just for the US, but worldwide. Global markets are already meeting the news with some trepidation. So the chances are you’re probably also feeling a bit concerned about your investments. With that in mind, let’s take a look at how the election result, and the prospect of President Trump affect property investment.
Within hours of the result being announced, global stocks plummeted $3 trillion in value.
Throughout Europe, US Stock futures fell by around 4.5%. UK stocks have dropped between 4% and 5%. Within just 10 minutes of the result announcement, both Saudi Arabia and Dubai saw a stock market fall of 2.7%.
On 9th November, the FTSE fell by 2% in early trading, picking up a little during his victory speech. The Hang Seng index also fell, down 3.16%, and the Nikkei 225 index dropped 5.36%.
By contrast, it was expected that global stock prices would have risen by over 10% if Clinton had triumphed. The Trump effect appears to be quite the opposite.
That is one serious hit. Equity assets have been thrown into the unknown, with higher volatility hitting these assets hardest of all.
So How Will Trump Affect Property Investment for Me?
Well, the first step is to diversify your portfolio quickly. This will help you assuage the volatility of any assets that are set to feel the brunt of Trump’s foreign policy, and the market uncertainty it brings.
Apart from gold, which is rising in value (up 4% to $1.316 an ounce), property remains a strong investment.
Property has a long track record as a ‘safe haven’ investment, a strong asset to hold in these troubled times. Whilst property in the US isn’t thriving right now, due to unreliability of returns, this bolsters things for the UK property market. Our strength and resilience in property, plus the renewed focus on the UK as the US flounders.
Even the new President is planning over £1bn worth of investment in the UK. Considering our status over the last few years, of significant discrepancies between demand (high) and supply (low), it’s a good call. This imbalance is placing upward pressure on property prices here, which is great news for investors’ capital gains, which promise to be both solid and strongly consistent.
OK, so I should invest in property now, but where?
London, whilst usually a good call has been experiencing a steady decline in prices at the top end of the market. However there may soon (some have suggested) be an increase in demand caused by Americans running screaming from their home country, hoping to relocate to the UK capital. Not sure about that but we’ll see.
But aside from London, there isn’t much of a change on the cards. The UK residential market isn’t really strongly affected by US foreign policy, nor equities, to much of an extent.
Nonetheless, Manchester remains the UK’s leading city for property investment yields, coming in at around the 8% mark. Manchester has one of the UK’s highest tenant populations. The demand for rental property here outpaces supply at a ratio of 4:1. And this is not likely to change due to Trump.
Will President Trump Affect Property Investment By International Investors?
Chinese property investors have long been keen on the US cities of Los Angeles, New York and San Francisco. But the election result has injected a high element of risk into investment coming into the US, with the result that investor return is likely to be affected. As such, the UK property market appears an attractive, more stable, option.
What’s more, with the pound plummeting to a 31 year low following Brexit, opportunity here is knocking hard.
Despite Hong Kong’s Hang Seng index falling 749.14 points in late morning trade directly following the result, and risk of capital outflow from emerging markets, there is a bright side. The Federal Reserve is unlikely to hike up in December, and as such the economy and political environment is not likely to see a dramatic change.
As we’re all pretty much aware, Trump’s policies regarding the Middle East make for a poor relationship with the US. This will cause some real uncertainty for quite a while. Directly following the result, oil fell to under $46 a barrel, with the global benchmark diving nearly 4% to its lowest since August, though some of its losses were quickly recovered later on. Middle Eastern investors, therefore, should seek to diversify their portfolios, both with gold and – ta-da! – UK property.
Over in South Africa, the reduced likelihood of a December Fed hike is also good news. However, the rand lost 65c following Wednesday’s result, and an erratic, fluctuating rand is likely to come next.
Here in the UK, we know that if we trigger Article 50, equities are likely to be strongly affected. In fact, it’ll be a much more direct effect than the US election result. On the bright side, though, Trump advisors are expressing some early thumbs-up for trade deals with the UK. Well, they’ve said we won’t be ‘last in line’, so that’s hopeful. If these sentiments are followed through, this could give the UK economy a boost. The advice for UK investors is to keep focusing on those all-important property yields.