BY NANCY DAHLBERG, NICHOLAS NEHAMAS AND CHABELI HERRERA
ndahlberg@miamiherald.com
The king of real estate is set to rule the country, but what will a Donald Trump presidency mean for local real estate, one of South Florida’s biggest industries?
We wanted to gauge response from Realtors, developers, economists, bankers and lawyers about possible impacts of the election, both in the short and long term.
We asked: Will a new president — especially a political unknown like Trump — mean uncertainty for Miami real estate? What will the election’s impact be on sales and developer activity?
We also wanted to know their views on whether Latin American investors would hesitate to invest in President Trump’s America after his strong anti-immigration stance. Will his election depress demand from Latin American buyers?
Overall, those who responded are mostly bullish, as you might expect from businesspeople who depend on optimism and consumer confidence for sales. We’ve selected a representative sampling of the views expressed and excerpted comments they made, mostly via email. (Thanks to the team at Bendixen & Amandi, our partners on our annual Real Estate survey, which helped us put out the word.)
Trump’s policies on immigration and trade could have the greatest effect on the South Florida real estate market, Teshome said.
“The president in a sense is using a blunt instrument where you’re dealing with the whole country. Real estate is an industry where it’s very localized. It would be hard for a President Trump to craft a policy that affects the real estate market in South Florida.”
Since the early 2000s, the local real estate industry has relied heavily on foreign investors. But their numbers have thinned because of a strong dollar and weak foreign economies. If Trump’s proposed policies result in higher tariffs, friction over trade and lower confidence in the United States as a stable haven for flight capital, that could scare away foreign investors, Teshome said.
“Fewer foreign buyers would weaken demand.”
“I think people are just happy that the drawn out, vitriolic election process is over. Interest rates are low, the economy is solid and many prices have adjusted. The timing couldn’t be better for buying in Miami.”
Longer term, he said: “I expect continued improvement barring any major catastrophes.”
Morr’s business is about half foreign, half domestic; his domestic business has grown because of the U.S. housing market recovery and a strong dollar.
Will Latin Americans continue to invest in Miami real estate? “The U.S. is still the U.S. — a safe haven for people from around the globe. Miami is the unofficial capital of Latin America and will continue to be the beneficiary of Latin American money.”
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Pรฉrez recently returned from a sales trip to Mexico and said the biggest fear of potential buyers for real estate is the possible visa status changes that could take place with Trump as president.
“We had to reassure our clients that in our opinion there will be no increased restrictions on visas or ownership requirements for foreign buyers. Trump is a businessman and understands the importance of foreign buyers. We have done four condominium towers with him in Florida, and he was part of the presentations to Latin Americans. ... I believe that, if anything, he will try to promote this investment to help our economy grow.
“A very large percentage of our buyers are from South America and also from Europe. They invest not only because they love Miami’s lifestyle but also because it is the most secure country in which to invest. Uncertainty is a big deterrent to investment, and I hope that no policies are developed which in any way affect our standing as the most secure country in which to invest. I am also hoping that, after clear and unbiased reflection, Mr. Trump realizes that trade will lead to greater growth and employment in America, which is the cornerstone of his campaign.”
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“Overall, Trump will have a positive effect on the real estate industry. People may pause for a week or two while they digest, but I expect the market to resume its positive course.”
Over the next 12 months, “given he is heavily invested in the real estate space, I would expect him to protect favorable real estate tax laws currently in place and will probably try to create more incentives to encourage investment/development.
“Favorable policies will be good for everyone, but the personal tax incentives from the income and capital gains would benefit U.S./resident buyers more.”
Her personal concern: Supreme Court justice appointments and how that will affect her daughter’s generation.
“We have seen so much unpredictability in the course of this election; we are dealing with a very unpredictable person. That will destabilize our dollar in the short term, which will create opportunities for foreign investors. …The message we are hearing from the new administration is that more jobs will be created, more infrastructures and growing of the economy. If this is truly the case, it will have a positive impact to our market. No matter what the rhetoric was prior to the election, the new administration will focus on reality and hopefully on the positive path this country needed badly.”
As to the short-term impact of a Trump presidency on Miami real estate, as well as the impact one year out: “We don’t see any change in that trend. Miami has been a magnet for investors for more than 30 years, regardless of different presidents, political moods and parties — they look at the long term. … As the electoral campaign defuses, people will go back to business as usual. Trump talked about a tax cut, which might help to increase profit for investors. That is music to their ears.”
On Latin American investors in particular, he said, “Investors are pragmatic. They look at numbers and returns; they don’t look at political correctness, values, etc. If Trump reduces capital gains, income-tax rates and eliminates the estate tax (which is huge for foreign investors), they will keep investing in South Florida.”
The country was likely heading into a recession in 2017 no matter who was elected, but the uncertainty of a Trump presidency will accelerate it, McCabe said.
In South Florida, the implications of a Trump presidency will likely be most hard-felt among foreign buyers, who make up about 60 percent of South Florida real estate sales, he said, because of Trump’s disparaging remarks against Hispanics, Muslims and other minority groups.
“Without a doubt, Mexican buyers that have been a growing segment; I think many will find it difficult to invest.”
The threat is particularly badly timed now, when foreign investment has eased due to recessions in other countries and a strong U.S. dollar.
Issues have arisen closer to home, too. Luxury real estate, which is largely bolstered by foreign investors, has been suffering from drops in resales and increasing supply. The uncertainty of Trump’s presidency will likely raise more questions for investors. In the past several months, several developers have put plans on hold due to the slowdown in the market, McCabe said.
“There is a tremendous amount of concern from different countries about how his presidency is going to affect global economics. We are headed for a very volatile period in the future, especially in the luxury real estate section.”
“Generally speaking, I don’t see a connection to any president and his/her election on the one hand, and Miami real estate functionality, on the other. I think if anything we might see some pullback by U.S. investors in the short term who are concerned about yield over the next year or so.
“Conversely, the long-term tailwinds that the U.S. is positioned to inherit or even seize makes for a very rosy picture for Miami real estate in the long run. It is a premier destination, and a low-interest-rate environment creates a long-term play for prosperity.
“It seems dubious to me that his campaign speeches will be easily put into government, [with] the executive branch being checked by the Legislature and judicial. And I think, given the rest of the world has such strong economic dislocations, Miami will continue to be one bright spot on the world stage, almost out of necessity when looking at the entire world and desirous of achieving yield in cash-flowing assets. The weather, lack of state income tax, population growth, low-interest-rate environment will help.”
Parker doesn’t expect a major impact this year.
“That said, I do believe the world in general has faced uncertainty by pausing on most major decisions, especially as we faced the end of a long and complicated election process. As has been seen in the stock market on the first day since the election, I expect that the world will find confidence in the fact that the U.S. is a strong and safe country to invest in. And as we see the country reunite, I think our real estate market will see a strong boost. I also expect that issues like Zika will subside, which will directly benefit Florida.
“Ultimately, I believe and expect Trump’s tax plan, banking regulations and overall effort to lower taxes will create more income, more spending power, which will lead to a housing industry boom. I expect we will see more impact as we move into the first and second quarters of 2017.”
In Florida, Douglas Elliman has seen slower velocity from foreign markets, but Parker believes that many such markets will resume their focus on the U.S., as he expects the security of investment and overall opportunity will increase under the Trump presidency. “I also believe that states like Florida will remain uniquely appealing due to our tax benefits and the continued maturity of our culture, educational institutions, hospitals and quality of life.”
On a national macroeconomic level, most people will take a wait-and-see approach, de la Vega said. “From a local real estate level, I believe people just wanted to know the definite outcome. Now that they do, they feel more confident making their purchase. Donald started off on a good foot in his acceptance speech by saying he wants to bring America together, thanking everyone around him for his success and verbalizing his admiration for Hillary in a long hard-fought battle.
“Some of his fiscal policies and less regulation could lead to economic growth. Jobs created in states that are most competitive will lead to a healthy more stable U.S. Most foreign investors look for stability and a democratic place to put their money. Overall, this country always finds a way.
“2016 definitely shifted to a more domestic buyer. Financing has eased, and job and wage growth were on the rise. I believe this will continue if we make for a better America. This will not be about who our leader is, this will be about who we are as Americans. Like Deepak Chopra said: ‘Perhaps the future no longer depends on a single leader but on each of us who can quietly dedicate our life to light, love and healing.’”
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“We have seen so much unpredictability in the course of this election; we are dealing with a very unpredictable person. That will destabilize our dollar in the short term, which will create opportunities for foreign investors. …The message we are hearing from the new administration is that more jobs will be created, more infrastructures and growing of the economy. If this is truly the case, it will have a positive impact to our market. No matter what the rhetoric was prior to the election, the new administration will focus on reality and hopefully on the positive path this country needed badly.”
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