The Donald v Hillary – Who Will Deliver a Better Return for Real Estate?

24.10.16

There's nothing quite like an election to get our emotions all fired up; the drip-feed of media hype can't fail to provoke excitement, anger, disbelief and despair (often a schizophrenic blend of all), depending on one's political leanings.

Across global markets, investment returns during an election cycle tend to be lower than the years immediately preceding and following an election year. But that shouldn't come as a surprise. We're all influenced by our emotions, and the build-up to an election is when feelings reach fever pitch, rooted to those all-important results. What we historically see after the fact, though, is a return to 'normality' once the dust has settled. As we know, history never fails to remind us that investing with emotion is not a prudent approach. Successful outcomes are those that begin with a plan that accounts for goals, time horizons and risk comfort levels.

Time zones certainly dictate the priority issues of the day. If we cast our minds back eight years, housing and the economy Stateside were the main talking points of Obama and McCain because millions of homeowners were going through foreclosure and the economy was in meltdown.

Thankfully today, the housing market and US economy look much healthier, and as such, candidates have turned their attention to more 'popular' issues such as immigration, gun control, and national security.

That said, there is still everything to play for in position-taking on housing policy. The US has certain performance anomalies not seen elsewhere. Real estate markets for one, have historically tended to fall during the final year of a president's second term. According to statistical research, house prices in the years between elections increase, on average, by 0.22% more than house prices in election year.

So what does all this actually mean? Is there a stronger candidate of the two pushing to the fore?

Possibly. It was only a few months ago that a nationwide industry survey conducted by NAR (National Association of Realtors), revealed that experts predicted a real estate disaster should Trump or Bernie Sanders ever take the presidency, the offshoot being that Clinton was the smarter choice when it came to the real estate market. Clinton has pledged $25 billion from her $125 billion Economic Revitalization Initiative towards helping previously disadvantaged residents into sustainable homeownership. Meanwhile, Trump has spoken out about eradicating the U.S. Department of Housing and Urban Development – the federal funding body in at the helm of affordable housing.

This helps to shed some light on CNNs latest surprising findings. Where previously, market growth and house prices were seen as markers of a flourishing society, in the wake of the 2008 crash, rising house prices may now be seen as an indicator that affordable housing will be less accessible under Trump's leadership.

If Clinton wins, Abode2's view is that we can likely expect something similar to the markets under President Obama — more of the slow grind of policy-making. That's not necessarily a bad thing. Clinton is more of a centrist candidate, and if the Republican party retains control of Congress, it's possible she could cooperate with a Republican Congress and balance the budget the way her husband did in the 90s.

Trump as president carries a weight of uncertainties in relation to policy. For example, he's talked about imposing tariffs on foreign goods. He could wield his "art of the deal" expertise and implement some popular, nonpartisan solutions. We expect many scenarios and arguments, which will be scrutinised as and when they happen.

If there's one thing that isn't in doubt, it's that this particular presidential cycle has produced two of the most widely disliked candidates in history. We've seen that election years historically post lower returns than in the years before and after an election cycle, but this year is unique in that both candidates are viewed so unfavourably. This lack of unity around each presumptive nominee means we will likely see further emotional instability surrounding the markets during this election cycle.

So is there a best practice scenario for voters in this present state of flux? As always - invest with a long-term, balanced and consistent approach. That way - one can at least mitigate against haste being the root cause road to error when the new incumbent takes up residence.

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