There has already been much speculation over how Trump’s presidency will affect the United States in the long term. Plenty of attention has been given to the country’s real estate markets, and whether they are likely to suffer or benefit from the shock election results, but what about real estate in Europe? It would be unwise to assume that European property markets will not be affected by what is going on in the US, however, will the impact be positive or negative? Realistically, it is still too early to know, but, looking at both sides of the story, here is what could happen to European property markets over the coming years.
Uncertainty in the US equals uncertainty in Europe
Looking at commonplace real estate transactions i.e. the buying and selling of homes that happens between the working classes, we are unlikely to see any real change occurring at this end of the market. Trump’s policies should not significantly impact everyday real estate transactions. However, when we consider real estate investment and the luxury real estate markets, there could be some change.
Uncertainty about the US and how Trump’s policies will affect the wider economy could lead investors and luxury real estate buyers to look elsewhere, signalling an increase in interest in real estate in European countries as well as in other parts of the world.
However, on the flip-side of this argument, if the US dollar does begin to slip as we head further into Trump’s presidency, this could boost purchases in the US by foreign investors as the lowering US dollar will give these investors more for their money. In this circumstance, interest in real estate investment could revert to the US from European markets.
At the same time, Trump’s promises to spend big bucks on the country’s infrastructure while lowering corporate taxes could also equal more investment in the US because of a short-term economic boost, and as investors keep their money on US-soil, avoiding the European markets.
More European property investment from the Middle East
Trump’s policies and heavily publicised anti-Islamic prejudices could also have an impact on both US and European property markets. It is expected that Middle-Eastern investors could look elsewhere, dissuaded from investing in the US so that Europe could see an upturn in Middle-Eastern investment. Yolande Barnes, head of Savills World Research, says, “It may well be that Middle-Eastern investors will be more inclined to look for alternative cities [to the US] to invest their money.” *
And then there are investors from other countries who may not agree with Trump’s policies and look to invest in real estate outside of the US on a matter of principle. European cities such as London and Berlin could see increased investment as a result.
More US Investment in London
Interestingly, since the Brexit vote, there has been an increase in US investment in the UK’s capital. There are now more US buyers and renters in London, according to Peter Wetherell, chief executive of London West End*, largely thanks to the lower British Pound. But, it is also expected that now, with Trump’s surprise win, that this collective back-turning on political norms from both countries will strengthen US-UK trade relations. And, with uncertainty about Europe’s political climate, this could boost London’s real estate market with even more US investment, while interest in the rest of Europe could falter.
Having said this, US property investors are not the only people to invest in the European property markets so if this group does focus on London or on the US itself; this should not have a significant impact on European property markets as a whole. According to Emerging Trends in Real Estate Europe 2017, Germany – and particularly Berlin – is the new haven for real estate investment. And, perhaps the anticipated strengthened relationship between the US and the UK will further convince international investors (non-US) to stay away from the UK and instead turn to markets like Berlin.
At the beginning of 2017, we can only speculate as to how Trump’s policies and presidential rules will affect European real estate markets. The results could go both ways – advantages for European property markets, or disadvantages. However, the likelihood is that it will not be clear-cut; there are sure to be both gains and losses for all concerned.
*Mansion Global story
