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BREXIT, CETA, and Trumpflation’s Effects On Real Estate

(N.B. Today’s post is a guest post from Michael Sadler at Access the Flock, who I met at one of the better real estate networking meetings I go to.)

How has Brexit affected North American real estate prices?

Brexit is supposed to cause real estate prices in Canada to go up until 2019 because investors are channeling money from London to North America.

Are US real estate price increases driven by BREXIT or is this an effect of U.S. stimulus and other US economic factors?

Recent U.S. data shows that prices are going up.

Since the Brexit vote happened in June 2016 the house price increases that you see in the above chart found on the Economist were probably caused by US stimulus, the economic cycle, or that real estate prices tend to rise over time. Brexit could help increase North American real estate prices further.

What is CETA, the Comprehensive Economic and Trade Agreement, and why would it affect real estate prices globally?

According to the European Commission CETA has passed:

The Comprehensive Economic and Trade Agreement (CETA) was adopted by the Council and signed at the EU-Canada Summit on 30 October 2016. Once applied, it will offer EU firms more and better business opportunities in Canada and support jobs in Europe.

Since CETA removes tariffs between Canada and the European Union it will reduce economic waste as both countries can trade products without 99 percent of the taxes. Global economic trade increases firms’ bottom line in the long run. CETA will help businesses in the long term and could increase real estate prices because real estate prices tend to rise in areas with businesses that create employment.

What is Trumpflation?

Trumpflation is Donald “Trump’s plans for massive infrastructure spending and tax cuts…” that “…will cause inflation to rise”. Trumpflation is already affecting bond markets by increasing bond yields because bond traders are selling bonds to buy stocks. The price of stocks and bonds are inversely correlated. Higher bond yields are expected to put upwards pressure on mortgage rates, because some mortgage rates are tied to bond yields, and downward pressure on home prices.

World leaders are trying to boost the global economy out of a slow growth period and avoid deflation.

The U.S. economy is stronger than the Canadian economy right now if you compare employment rates. A stronger U.S. economy means potentially rising interest rates by the Federal Reserve. Real estate prices tend to go down in a rising interest rate environment because less buyers can afford their mortgages.

What about the Trans-Pacific Partnership (TPP) trade deal?

According to Independent, “White House officials have admitted they do not believe the controversial free trade deal with 11 other Pacific nations will pass through Congress before the formal transition of power on 20 January.

Brexit, CETA, and Trumpflation all have a different impacts on North American real estate prices.

According to Jim Yih, don’t try to predict real estate prices. He predicts “real estate prices will fluctuate in the short term and they will go up in the long term.”

Summary

Brexit, CETA, Trumpflation and TPP (if passed) could affect real estate prices in different ways. The effects of Brexit, CETA, Trumpflation could each have differing effects on real estate prices in North America and could cancel each other out. Real estate has historically gone up in price and is known as an investment that provides a good return in the long run. In the short term, prices could be affected by uncertainty.

Michael Sadler is the Founder of Access The Flock Real Estate Marketplace where he helps Real Estate Professionals make money accessing cash buyers and motivated sellers. Follow on Facebook, Twitter, Google+, YouTUBE, LinkedIn Group, LinkedIn Personal.

 

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