Awaiting the Trump effect in realty markets

Any policy initiative that pushes dollar higher could add to investor uncertainty

Image Credit: AFP
US President-elect Donald Trump
Gulf News

Dubai: President-elect Donald Trump could add another bit of uncertainty into the Middle East’s already fluid real estate market sentiments. It’s already showing up in the form of a stronger dollar and to that could be added the fallout from any policy decisions after taking office.

“An uptick in imported inflation as a result of a weaker dollar will put already stretched Middle East household finances — still reeling from the economic fallout of the low oil price environment — under further pressure,” said Steven Morgan, senior Partner at Cluttons, the property consultancy.

“Inflation is already rising in the region due to cost containment measures introduced by the region’s governments as they work to cushion budgetary shortfalls. Any further contraction in oil prices will also have negative ramifications for the property markets, especially where the oil sector dominates office take up and is responsible for the bulk of new household creation.”

But Dubai’s realty could yet be a net gainer — “With events like the 2020 World Expo looming on the horizon, the surprise US election results may boost domestic investment activity temporarily, which will be welcome news for the property markets across the region as they currently work their way towards the bottom of their current cycles.

“From our standpoint, economic cycles have a habit of fuelling uncertainty and while this year has been particularly volatile. There are clear opportunities for investors.

Uncertainty

“Uncertainty is relative and it’s quite clear that it’s going to linger — so markets like Dubai are likely to benefit from more inward regional investment as investors gravitate to locations on their door step with a proven track-record.”

The Trump-forced uncertainty could even extend to the US realty markets from a Middle East investor’s perspective. In fact, even before the recent election, US cities were dropping in the list of preferred choices among high net worth regional investors.

While London followed by New York for 2016 were their top overseas picks in Cluttons’ recent Middle East Private Capital Survey, no US city figures in their choices next year.

And Dubai overtook London as the most preferred property investment location for 2017, while Toronto was the sole North American city cited as a prospect next year.

America’s loss could be Canada’s gain. According to Faisal Durrani, Head of Research at Cluttons, said: “Rising numbers of students from the Gulf travelling to Canada has certainly aided the city’s emergence in the minds of the Gulf’s wealthy. But it’s quite likely that it will serve as a proxy location to New York, while we all wait and watch to see what ramifications, if any, the US election result has on global property investment flows.”

For information on the real estate sector, within the UAE, please visit our sister site, GNProperty.com.

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