At the start of 2019 I said one of the biggest issues we will face
in 2019 is the potential for trade wars. The imbalances between several of our
trading partners are bad and need to be addressed, and the hope was that a fair
and balanced trade deal with China would be struck in the first half of 2019.
This has not happened....yet. So why do I care about this topic? How does this
impact real estate? Here are some of my thoughts:
wars are an item of uncertainty, and markets generally don't like uncertainty.
there is economic uncertainty, people like to 'wait and see'. They also hold
back out of fear that their wealth may decrease. So far the trade war has cost
around $5 trillion in stock market losses.
word 'war' is not an optimistic one at all. Markets are driven by mood. This is
not a mood-lifter.
are a country that attracts many foreign born and related consumers into the
real estate markets: trade wars make foreigners feel unwelcome and fearful.
Chinese investors have been the single biggest home buyers in the past 6 years.
wars result in tariffs....another word for a tax that is mostly picked up by
the consumer. Many tariffs have already boosted the cost of numerous
building/construction components, further eroding affordability.
Higher prices lead to inflation. Inflation causes incomes to
rise....including those of construction workers and everyone who makes all the
products that go into building and renovating homes.
prices trend upwards leading to inflation, interest rates could rise again.
Higher interest rates are never great for real estate markets. They are worse
for corporate (and personal)debt as servicing that debt costs more which can
take away from spending, investing and hiring.
Let's hope a fair trade deal is resolved soon.
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