Many people expect the next four years to be a swell time for real estate investors because president-elect, Donald Trump has his roots in real estate. Of course, the expectations makes sense in the light of the fact that Trump’s ascent to the presidency marks the first time real estate guy will live in the White House. Trump has his name on hundreds of residential and commercial properties, and Golf courses in the U. S. and in different parts of the world. In fact, his critics have campaigned heavily against him because he has more roots in business than in politics.
However, the reality is that many real estate analysts are basing their bullish forecasts on the assumption that Trump will “support” the real estate industry because he is a real estate guy. However, Trump has outlined big policy ideas aimed at making America great again; sadly, the real estate market doesn’t appear to be on his priority list – perhaps he is trying to separate business and governance. This piece seeks to examine how the U.S. real estate markets are likely to fare under Donald Trump’s presidency.
Here’s how the real estate markets could fare under Trump
· Trump can’t eat his cake and have it with taxes
Trump has campaigned heavily on the need to lighten the tax burden on Americans and we can believe that he has our best interests at heart. However, the plan to cut taxes comes with a caveat that might undo all the hopes of potential gains that real estate investors might have been nurturing.
Trump might not offer much of a respite to homeowners in the long term because he is offering contrasting promises. To start with, Congress is already running a negotiation process towards cutting taxes even before Trump takes the oath of office. However, the current tax regulations in the budget reconciliation process require that bills balance any loss of tax revenues with a commensurate increase in other sections of the tax code.
Hence, Congress is already working to kill the 1031 exchange and business interest deductions in order to maintain a balance when Trump begins to cut taxes. The problem however is that the tax cuts proposed by Trump will favor the wealthiest Americans while the death of the 1031 exchange and business interest deductions will hurt the vast majority of Americans. Congress is already working behind the scene on axing the 1031 exchange and business interest deductions in to pay for Trump’s reforms.”
· Trump has promised he’ll bring back the American dream of home ownership
During the campaign and buildup to the elections, Trump hinted that he’ll be supportive of the American dream of homeownership. In July, he posted a tweet saying “American homeownership rate in Q2 2016 was 62.9% – lowest rate in 51yrs. WE will bring back the ‘American Dream!” in response to the data from the U.S. Census Bureau data on home ownership rate. Donald Trump has also stayed true to the message in subsequent statements before the election.
In August, while speaking with the National Associations of Home Builders in Miami Trump maintained that “Home building is very close to my heart“. He however noted that “he regulations are horrible — what’s happening with regulations.” He especially riled against over-regulation saying “Over regulation, which is a big problem, is costing our economy two trillion dollars a year…“This is not what we want…and it will change if I’m elected president,” he said about incompetent leadership as he went after the former secretary of state.
Heading into 2017, Trump’s vocal stance against some of the issues that have bedeviled the real estate market might provide bullish tailwinds in the short term.
The axing of the 1031 is good for corporations and the wealthy 0.01% who can afford to hold their properties instead of improving and trading them up. However, the death of the 1031 will make investing in real estate extremely difficult for the average American. Hence, it is important that American’s rise up to the occasion to prevent the death of the 1031 by mounting pressure on their representatives in congress
Axing business/real estate interest deductions would make it nearly impossible for Americans without huge sums of money to invest in real estate or operate their businesses or pay their employees, since most American aren’t wealthy enough to entirely fund their business/investment efforts with their own cash..
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