How Will Donald Trump’s Presidential Election Victory Affect the UK Property Market:
On November 5, 2024, Donald Trump was victorious in his US presidential campaign, re-elected into office after his previous tenure from 2017 to 2021. This came after he was able to win in the swing states, with Pennsylvania being a notable win. Of course, Trump’s presidential policies will have a host of impacts on the USA and global affairs, but this article delves into how the UK’s property market will be affected by his election.
Current UK Housing Market
Currently, in the UK, house prices have risen by 2.8% between August 2023 and August 2024. Zoopla data also suggests a 1.5% increase by the end of 2024 due to sales being at their highest rate since the 2020 boom. There has also been a shift between rents and buying, this is partly due to rapid rent growth and partly due to declining mortgage rates supporting more first-time buyers. However, mortgage rates are still higher than they have been for the previous decade. There have also been recent changes to stamp duty that came into effect as of the 31st of October, the day after the UK’s autumn budget. This could see a lot more first-time buyers paying tax as thresholds were reversed and the overall surcharge increased by two percentage points. This is the UK property market as it stands, but with recent presidential changes in the USA, there may be changes on the horizon.
How Trump Will Affect the UK Property Market
Immediate vs Long-term Impacts
The market response to Trump’s victory can be divided into immediate and longer-term effects. There was not an immediate flurry of market activity following Trump’s election as people take the ‘wait and see’ approach. UK gilt yields were up slightly (which can affect mortgage rates) and the US Dollar had become stronger compared to the pound, but neither movement was of huge significance.
In the longer-term we can expect a number of changes that will impact the UK property market, due to Trump’s increased spending, tax reductions and changes in global political approaches.
Effects on Interest rates, Inflation and Mortgage Rates
Many expect Trump’s economic approaches to create inflationary effects. This is due to his policies of increasing tariffs, reducing the USA’s reliance on cheaper imported labour, tax-cuts, and increased spending. These policies may cause the US Federal Reserve to maintain higher interest rates for an extended period. The NIESR has predicted that over two years, the UK inflation rate would be 3-4 points higher while interest rates would be 2-3 points higher. A rise in US treasury yields and a stronger dollar compared to the pound may eventually cause UK mortgage rates to also increase.
However, UK debt markets could look more attractive than those in the US, which could relieve pressure on yields and reduce mortgage rates.
Trade Relations
Trump will certainly look to implement more protectionist policies which are more than likely to be tariffs. He has plans for a 10% tariff on all European imports and up to 60% for Chinese goods. This will be felt across Europe, especially within export-driven economies. Tariffs can create a sense of economic uncertainty and during these times, many investors have turned to property investment. This is because they are tangible assets and allow investors to use real estate to hedge against volatility and increase stability. Investment will most likely increase in areas with strong potential for capital growth, high demand and population growth, and areas of strong regeneration. The UK has many cities of this nature, such as Birmingham, Manchester, Leeds and Liverpool.
Trump also has a mixed relationship with the UK which could affect our property markets. Whilst Trump has an admiration for British culture, his views often don’t align with our Labour government, weakening the chance for agreements to be made. Despite this, Trump has been considering making a special deal with the UK, which would exempt British imports from the potential tariffs. Negotiations will be coming over the following months, which will prove critical for the UK and the USA. If Trump doesn’t exempt the UK from the tariffs, the UK will have to decide between retaliation along with the EU or striking a bilateral agreement with the US.
As for property investments, if relations between the UK and US are good, there could be more American Investors adding UK property to their portfolios. This is due to the weakening of the pound, and strong performing markets. However, any EU retaliations or trade tensions could reduce this investment. Further to this, uncertainty over relations between America and the middle east could see middle eastern investors looking more closely at the UK.
Impact On Property Investors in the UK
Potential Positives
One positive not spoken about yet is the role of American investors in the UK property market. Kamala Harris was proposing higher corporation and capital gains taxes, but with Trump, these could be cut. This can pave the way for further US investment into UK property, which is already responsible for funding large-scale developments in the UK.
Another positive is the currency exchange rates favouring UK assets. Although the Dollar has strengthened recently, Trump’s policies to boost US domestic growth could be at the expense of a stronger dollar. This may make UK property more affordable for US investors, which will raise demand and prices in the UK. Demand for UK property may also be increased due to it being a ‘safe haven’ and because of growing property values. Higher inflation can mean investors experience higher capital growth.
Potential drawbacks
As mentioned throughout, Trump’s election may bring uncertainty and negatives for property investors in the UK. Global market uncertainty and heightened tensions can massively impact financial markets and the economic growth of the UK. The potential tariffs will also impact our economy significantly.
Conclusion
President Trump’s election will certainly affect UK property markets, but time will tell the extent of the impact. There is much global uncertainty about Trump’s policies, potential tariffs, or exemptions, which will all have a global effect. Keeping up with Trump’s actions will ensure you are better equipped to invest and understand how his actions will impact the UK property market.
Next steps
If you have any questions or are interested in property investment yourself, browse our current UK investment opportunities or speak to one of our expert consultants by calling our UK team at +44 (0) 113 380 8930 or enquire via our website.
