What Trump’s win means for Australian housing

Adam Smith 16 November 2016

What Trump's win means for Australian housing

Donald Trump’s win in the US election has shocked the world, but what will it mean for Aussie real estate?

Donald Trump’s ascendancy has been an unlikely story from the beginning. The reality-TV-star-cum-presidential-candidate was a massive underdog heading into election day, but managed to pull off an upset victory that set pundits reeling and initially sent markets into a tailspin.

But markets have since recovered, and analysts have had time to gauge the likely impact of a Trump presidency. For Aussie housing, there’s the potential for both good news and bad.

The bullish case

Bullish case

For a candidate many have seen as unpredictable, Trump’s downsides could have an upside for Aussie property. REA Group chief executive Nerida Conisbee recently told News Corp that Australia could be seen as a safe haven in the midst of global volatility.

“Australia will be a beneficiary of this as it is considered to be one of the safest markets in the world,’’ Conisbee told the Daily Telegraph.

This could particularly be true for Chinese investors. During his campaign, Trump promised to slug China with high tariffs on goods imported into the United States. Along with this, he’s vowed to label the country a “currency manipulator”, and to pull out of the Trans-Pacific Partnership Agreement that would have seen more open trade between the countries.

Mark Mendel, chief executive of property investment group iBuyNew, said Australia is likely to see a new influx of Chinese investment.

“Mr. Trump has already declared economic war against China. As such, a large portion of Chinese that were investing their money in US property will need to shift their focus and invest elsewhere. There is a big chance that much of this money will come to Australia,” Mendel said.

But disaffected Americans could also make their way to Aussie shores, Christie’s International agent Ken Jacobs told Domain.

“In the lead-up to this election the level of inquiry on property from buyers in the US has been building steadily. We expect this to be a repeat of what happened immediately following the 9/11 terrorist attacks in New York. In the aftermath of that inquiry levels from the US went up 400%,” Jacobs told Domain.

Mendel said it’s also likely more investors will look toward property as the share market becomes increasingly volatile.

“The unknown of what policies President-elect Trump will execute will see markets continue to be volatile and as such many will move their money to more stable assets such as gold and property,” Mendel said.

The bearish case

Bearish caseThere could be potential downsides to the impact of a Trump presidency on the Australian housing market as well. Most pundits who fear Trump’s effect on the housing market argue that Australia could see fallout from the Trump administration’s potential impact on the global economy.

AMP chief economist Shane Oliver has warned that Trump’s isolationist trade policies could have profound implications for the Australian economy, telling Domain that “a trade war that drags Australia into a recession and impacts adversely on our sharemarket would see a big drag on our property market”.

According to Oliver, even an influx of new interest from foreign buyers could have downsides.

“The problem is that anything that adds to demand in an already hot market is a bit of a problem in the sense it pushes prices further into unaffordable territory for ordinary Australians,” Oliver told news.com.au.

Trump’s win may also cause a change in course for the Reserve Bank. After easing monetary policy over the last five years, the RBA could move to hike rates as Trump’s trade policies cause global inflation to climb. This combined with a weakened Australian Dolllar as a result of economic uncertainty could see the RBA begin to tighten the official cash rate.

Prior to the election, RBA governor Phillip Lowe argued that Trump’s election could have a dramatic effect on the global economy, saying that “the possible election of President Trump wouldn’t be as benign an event” as Brexit, which has seen the British Pound shed around 17% of its value versus the US Dollar.

At the very least, Trump’s win may have reduced the likelihood of a further RBA cut, BetaShares chief economist David Bassanese told News Corp.

“Markets had a one-in-three chance of a rate cut priced in the first half of next year just before the election result. These odds then rose with the initial shock of Trump’s victory, but have since fallen to only a one-in-five chance,” he said.

Image: Shutterstock

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