November 2024 Real Estate Newsletter | US Elections Special Edition

"Trump Storms Back" was the headline of the New York Times just after it was projected that Donald Trump became the second president in history to win a non-consecutive term (after Grover Cleveland). For months, it has been discussed what will happen if Trump gets elected again. We ask the same question, specifically for the global economy and real estate sectors in the US and abroad. Let's see.

USA

It is the return of "Trumponomics" as the Economist puts forward. But what is it?

One important aspect of these elections is that the Republicans not only won the White House but the majority in both chambers of Congress (as per the House of Representatives projection). This means that Donald Trump will have, at least, two comfortable years for legislating his aggressive economic agenda.

The first response to Trump's victory came from dollars, stocks, and Treasury yields which gained value significantly. As the mortgage rates go hand in hand with the 10-year Treasury note (BX:TMUBMUSD10Y), they started to increase as well.

First things first: major tax cuts. It is expected that Trump will immediately cut corporate taxes and personal income taxes. Although this expectation drove the stock market up, it will also mean a significant loss for the US budget and a probable large budget deficit. To accommodate this deficit, the US government is likely to issue new bonds which will decrease bond prices and increase yields, causing elevated mortgage rates.

Secondly: tariffs. Trump is keen to wage an aggressive trade war against China. A higher Yen and strict tariffs mean less opportunity for cheaper goods in the US, which will eventually drive up a slowing-down inflation.

Thirdly, rate cuts. As he talked about influencing Fed decisions, he wants to speed up the interest rate cuts. This will make borrowing easier and it will likely boost the prices further.

At the same time, Trump proposes to open federal lands for construction which could boost the housing supply to decrease prices. However, the feasibility of this policy remains a question mark.

In short, we are expecting lower interest rates (if Trump acts agressive on Fed), elevated mortgage rates, higher inflation, stronger dollar and stricter tariffs.

UK, Europe and Türkiye

Higher tariffs are not only dangerous for China, EU economy is also at stake.

A strengthened dollar also means dropping the value of the Euro by around 10%, as well as depreciation of the Pound.

This "collateral damage" is likely to result in slower growth for the east side of the Atlantic.

As Trump previously mentioned to "punish de-dollarization", this could affect both the Global South and Europe and increase the polarization between the US and BRICS.

For Türkiye, it has been a mixed picture so far. Contrary to the European counterparts, Turkish lira and assets gained momentum after Trump's reelection.

Türkiye also wants to benefit from comparative advantage resulting from higher tariffs on China, military industry expenditure, possible resolution of the Ukrainian War, and foreign investment.

In short, we expect Euro and Pound to struggle against a stronger dollar, but Türkiye may benefit from the situation if the cards are played right.

See you next month, at the last issue of an eventful 2024!