How Does the Trump Presidential Victory Affect Australian Property Markets?
The surprise and unprecedented Donald Trump presidential victory over Democratic rival Hillary Clinton was not anticipated by the global investment markets, which had been favoured a Clinton win and supported by leading analysts. Due to previous campaign rhetoric made by Trump likely to negatively impact the American and to a lesser degree the world economy, financial market tumbled with the S&P 500 Dow futures falling 5% before recovering. European stocks also fell initially, however the Stoxx Europe 600 gained some 1.5% by the close of trading following the election result.
Economic experts warn that the US and global economy faces a very uncertain future should Trump implement some of his previous campaign statement. Cancelling existing trade agreements will likely negatively impact the USA’s economic growth, and the cutting of corporate taxes to 15% as advocated by Trump, is forecast to significantly increase the government budget deficit. There is considerable disquiet from the 58.8 million Democratic Party voters as to the future of the USA, with the Canadian immigration website crashing due to American interest following the result.
The Australian economy, which has shown 25 years of uninterrupted economic growth largely due to the influx of skilled and wealthy migrants, will continue to benefit from an increasing rate of North American migration and investment. Historically more American have relocated Down-Under than visa vera. In the event that the world faces a down turn globally and Australia’s major trading partners (China) struggle to maintain growth under a Trump presidency, the RBA may further cut rates in 2017 in Australia to support the local economy. This will further the support the 40 month strong and continued residential home values growth, particularly in Sydney and Melbourne. Similarly, key industrial property markets will be benefit, as will tourism and commercial office market in select locations.
Although the Trump election saw the S&P / ASX 200 A-REIT Index fall by 1.59% over the day post the election result, the latest trend reflects some recovery. Global investors are likely to continue to see the highly transparent Australian listed property market as a safe alternative to the significant uncertain of the USA commercial property markets. Likewise, the BREXIT affected UK and European markets are remain higher risk investment locations as Britain negotiates a ‘soft’ exit from the EU.
Chinese investors will positively respond to investment and development opportunities present in Australia as an alternative to the USA, especially should Trump continue to marginalise China and seek to cancel trade agreements and regulate currency exchange rates. Should Australian exchange rates remain in the AUD 0.70 to AUD 0.80 to the USD, the continuing recovery of the industrial property market (especially value add and manufacturing facilities both small and large) will continue to reflect the current land value and capital appreciation in Greater Sydney metropolitan locations. Similarly, the Australian tourism market’s strong recent recovery is likely to continue and benefit from the competitive exchange rates, whilst property associated with education and residential facilities for the international student market will continue to increase in value. The future economic and property market trends and direction will be largely determined by the Trump administration and the global response to any policy changes.
NOTE: Any comment contained above should not be considered investment advice as this is general in nature and not specific to any property investment or development project. Investors should undertake further investigation and due diligence with expert advice prior to any purchase, disposal or development decisions.