Donald Trump Victory: What it means for NZ?

The polls got it wrong again. After calling the Brexit the wrong way, it looks like the polls got the US election wrong too. A Donald Trump victory means the Republicans are back into power after 8 years of rule under the Democrats.

If Donald does what he says he’s going to do, he will build his wall and implement border control restrictions to control immigration.

As for the economy, he says he will reduce business taxes (which will benefit him as well) in the hope it stimulates investment. He plans to implement policies which brings jobs back to America.

What effect does this have on New Zealand and the property market?

To be honest, NZ makes a small proportion of US trade. If Donald gets his way, he will scrap the TPP deal which was contentious to begin with anyway.

With regards to immigration, in the short term, those who don’t like the Donald Trump rule may emigrate overseas and New Zealand is a popular choice. After all, New Zealand just got voted the fourth best country in the world.

With regards to property, US election and a Donald Trump victory is not a key driver of the NZ property market. Unlike shares, property and the real estate market is inherently local. Just look at London’s real estate market after the Brexit. The exchange rate dropped and London’s property prices keep going higher. The stock market on the other hand dropped.

That is the key lesson of this post: property markets are driven by availability of credit, supply, and demand coming from population growth and demographic changes. NZ and in particular Auckland’s supply of housing is still limited (just refer to the recent news on cancelled apartment projects). The housing shortage is real.

To be sure, the only factor which could bring a halt onto NZ’s house prices will be contraction of credit. When credit becomes difficult to get and interest rates rise significantly, it will slow down demand and bring the property market under control. So rather than worry about who gets the White House, spectators and investors should worry about what the Federal Reserve will do. Because the Reserve Bank tends to take its cues from what other central banks do overseas. This will affect banks costs of funding and in turn will affect availability of credit.

That would be a key development to watch for over the coming months.

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