The Impact of US Trade Policies on Real Estate

Real estate investors and industry leaders meet to discuss implications and advantages of the Trump administration’s approach to trade

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On May 22, AmCham China’s Real Estate and Development Forum hosted “Trump – Implications for Property Markets”, an event dedicated to discussing the impact of the current Trump administration on the real estate sector.

Chief Economist and Global Head Researcher at Cushman & Wakefield, Kevin Thorpe, led a cohort of a dozen insightful industry leaders through a presentation at the AmCham China headquarters in Beijing. The keywords “growth” and “anxiety” drove the discussion forward throughout the morning. Highlights included discussions of the future of the property market, global investments, and the macro-economic principles driving changes in the market.

Opening remarks and introductions were given by Sean Wang, Vice President Greater China, Managing Director North China of Cushman & Wakefield.

Growth

The impact of Trump’s election as well as administrative action via tax cuts throughout early 2018 has had widespread influence, and resulted in growing market investment worldwide. Currently, the global economy is robust and showing a GDP growth of around three percent annually. In China, the economy grows rapidly and job growth occurs in tandem.

Despite trade threats between the US and China, real estate has space to thrive and there is a stronger demand for real estate in China. Raw demand for office space is increasing across all property types. Shanghai, Shenzhen, and Beijing rank among the top 10 in raw market demand for office space.

Overall, China is in a position to experience growth in 2018 through foreign endeavors, and demand for property will boost. Strong trends indicate that this growth and economic prosperity will continue far into 2018.

Five Chinese cities occupy the top 20 cities in raw market demand for office space, three of which are in the top ten.


Anxiety

With the current administration, anxieties about interest rates, trade, and policy decisions inevitably arise, Thorpe indicated. Volatility causes the market to react viscerally. Low unemployment rates, tax cuts, and rising interest rates impact the market, but do not negatively impact the real estate sector, Thorpe further noted. Rising interest rates will give more leverage to the sector, and volatility has the capacity to push capital into more essential classes like real estate. Thorpe underlined that a re-balance of capital can occur when money goes into the stock market and naturally transcends to destinations such as commercial real estate.  

Trump and Trade

Following his election in 2016, there are a number of policies that Trump has proposed that have not yet been put into action. The uncertainty of Trump’s future action can make investors, consumers, and administrators tense. So far, the only proposed policy changes from the trade frictions that are to be implemented and actualized by the Trump administration include tariffs on steel and aluminum, solar panels, and washing machines.

Forecast and Discussion: What’s Next?

The growth of Beijing (and China in general) is on a healthy rise. Thorpe stated that the fundamental economics behind this growth is stable, and there is a high supply and demand for office space. Beijing will create at least 125,000 office jobs this year alone – the office sector will continue to benefit from high demand. Though market values are no longer surging, the market is still appreciating in value.

Following his presentation, Thorpe answered questions about construction, currency values, and advantages of investing in China over other foreign endeavors. Real estate investors have an advantage in China, but must pay close attention to opportunity in individual cities. Thorpe advised creativity when looking at the types of spaces that are viable in the market, and suggested that such creativity is necessary to navigate challenges that arise from the financial component.

Thorpe reasserted this point noting the value of taking advantage of China’s consistent growth. The event concluded with Thorpe’s indication that through Trump’s current and potential future administration, there is a high probability that rising debt will be an obstacle to overcome, but remains somewhat unpredictable. The consequence for real estate is that action must be taken with careful attention to the impacted areas (market growth and location) and not to fixate on smaller, inevitable challenges.