ASIA VIEW: Cheers over tears

While the outcome of the US presidential election may have been surprising to many, so is the fact that 53 percent of Chinese real estate investors are now more positive about US property following Donald Trump’s win, according to a survey of 500 mainland Chinese citizens by East-West Property Advisors.

The survey, conducted immediately after the election, revealed that only 16 percent of respondents said they are now less likely to buy in the US.

The result is meaningful, as a recent Asia Society report showed that Chinese investment in US residential property amounted to $93 billion between 2010 and 2015, while deployment in US commercial property rang in at $17.1 billion over the same period.

This year has been no different. In October, China’s HNA Group splashed out $6.5 billion for a 25 percent stake in Blackstone-owned Hilton Worldwide and China Life Insurance led a group of institutional investors in the acquisition of a portfolio of US hotels for around
$2 billion from Barry Sternlicht’s Starwood Capital Group. Indeed, there was a plethora of earlier deals this year highlighting Chinese appetite for US property.

There were initial fears that a win for Trump would hit Chinese investor confidence, especially given his anti-China campaign rhetoric in which he promised to slap a 45 percent tariff on Chinese imports.

Yet, after the fact, Chinese investors in the survey said they respect Trump as a dealmaker and businessman, believing that a Trump-led US will likely lead to a better domestic economy and gains in property.

The investor sentiment largely chimes with the opinion of the large real estate consultancies. CBRE’s global chief economist, Richard Barkham, said in a recent commentary that while the election of Trump represents a material change of direction in foreign and economic policy by the world’s largest economy, the result will not have a negative effect on global economic growth in the next two years, assuming a reasonable degree of continuity in US trade policy.

In fact, Barkham went on to say that if President-elect Trump follows through on his plan of higher spending and lower taxes, as well as reduced regulations on business, there could be increased wage growth and higher inflation, which would in turn be a boon for commercial real estate by helping to boost rental growth.

But in the event that a Trump presidency does harm the US economy, there would still be some interesting knock-on effects for Asian investors. For instance, slow US growth may force the Federal Reserve to raise US interest rates more slowly than anticipated, which could cause the US dollar to weaken after many years of strength. This scenario would give some countries – notably Japan, where the domestic currency is already very strong – more relative financial firepower when investing in dollar-denominated property.

On the flip side, it may price US investors out of Asian property markets. Recent data from Real Capital Analytics showed that for the third straight year purchases in the region by non-Asia-Pacific investors have been declining and currently represent less than
$10 billion after peaking at almost $38 billion in 2007.

This might overall make Asia an even more interesting play for locally-based investors, as the fundamentals of the property markets of developing Asian economies should see little to no effect from a Trump presidency. JLL says China and India are experiencing strong secular growth, which is unlikely to slow sharply for the next few years. Investors and large multinational occupiers should continue to be attracted to important commercial property markets like Shanghai regardless of who is US president.

Both home and away, the initial reaction to the US presidential election result from Asian property investors has been one of cheers and not tears.