To begin, any election year comes with it’s fair share of speculation and guessing games. It doesn’t matter if the favorite to win is a Republican or Democrat, opposing supporters will say that electing a President of the other party will bring about the end of the world. As we’ve seen throughout the history of the United States, this isn’t the case. We are still a strong nation filled with opportunity. We don’t top many meaningful categories in the world, but we still have a great nation nonetheless.
This election has been quite polarizing and involved quite possibly the most media attention ever. Every candidate has flaws, including the current candidate’s, Hillary Clinton and Donald Trump. While a lot of people assume Clinton is your stereotypical candidate, the same cannot be said about Trump. He is definitely a wildcard in the race, for better or for worse.
So what could a Trump presidency mean for land investment?
The first thing that needs to be pointed out is the uncertainty. Analysts will give you all sorts of metrics to point out what will happen to varying industries, but the truth is, that is all theoretical. There is no way to properly predict exactly what will happen to land investments with a Trump presidency.
Another possible outcome for land investment is volatility. Again, during most election years, many industries go through states of volatility in values. Certain sectors may swing up and down throughout the course of the election and even after the results are finalized.
This volatility is usually not a cause for concern as most markets tend to stabilize after the dust settles and investors realize that the world has not ended.
Tax Reform Stimulus Then Regression
One of the factors of a Trump presidency that could have a more lasting effect on land investment is his tax reform proposal. Trump has been a big proponent of tax cuts, decreasing the rate of the highest income earners and increasing standard deductions for all. He has stated that spending would remain with military, social security, medicare, and raise spending on veterans health care.
This has the potential to jump start the economy at first. By increasing standard deductions, people would pay less in taxes or get more back on their return. More money during tax season leads to more spending. However, this could hurt in the long term as it may translate into higher deficits and interest rates.
In turn, higher interest rates means borrowing money for loans could become more challenging, pushing fringe land investors out of the market. This would obviously be a poor situation for those looking to sell off land as they no longer have the amount of buyers they would have, removing the ability for bidding wars and multiple offers.
The China Trade War
Trump has been adamant about an ensuing trade war with China. Any trade wars, be it with China or Mexico, would hurt importing and exporting. This could potentially raise prices of imports and reduce the number of exports.
Placing foreign tariffs on imports from China would trickle down into the consumer's’ wallets, not force U.S. companies to use U.S. based suppliers. Tariffs on imports would likely result in a response from China or Mexico, placing tariffs on goods from the U.S. This would make it harder for companies to export goods to those countries.
This can affect land investment because there is currently a lot of real estate inventory and land being purchased by foreign investors. Chinese investors are a big chunk of that group. The bad blood could cause them to stay away from American investments. This removes some competition for U.S. land investors but also removes potential buyers with large pockets for U.S. land sellers.
Land is Land
Speculation can be made every single day until the election is finalized but the point is that it is virtually impossible to say with one-hundred percent certainty, what will happen. A saving grace is that historically, land value appreciates. Sure, land values may go down in the immediate future but eventually those land values will rise again, giving investors a return. It would take some serious catastrophes for land values to stop appreciating over the long term.