Will Trump's Immigration Agendas Wreck Miami's Real Estate Market?
“There is a tremendous amount of concern from different countries about how his policies are going to affect global economics.”
It’s kind of a crazy world out there right now. As summer turns to fall, we have been witness to unprecedented worries and calamities, from nuclear nail-biting scenarios, to blistering wildfires to destructive hurricanes, all very real in their consequences.
You see, these things all affect our lives, on a personal level, but also economically through introducing uncertainty into markets. What happens when doubt saturates markets? Sources of revenue dry up, because investors aren’t investing, and people aren’t buying. Jobs evaporate. Prices rise but not incomes, and with increasing inflation, the probability of a recession.
It’s Time to Begin Connecting the Dots.
You could say without much embellishment that the Donald Trump presidency, thus far, has also been one wild ride. Not everyone agrees with the manner which Trump has wielded his administration, and few will argue that many of his policies have been somewhat controversial, to say the least.
For Miami real estate, Trump’s immigration agendas may have added that pinch of extra Latin investor reticence after being derailed by the dollar, while enduring so much economic and political turmoil at home in South America. This extra caution will not bode well. We all know how important wealthy foreign buyers are to South Florida’s real estate industry.
Trump’s immigration policies are also affecting the national real estate market, and in turn, the health of the American economy, sending tremors throughout financial markets across the globe. His attempted travel ban on seven Muslim countries, aggressive deportation campaigns, restricted foreign visitor acts, and most recently, plans to expel the Dreamers, are creating an atmosphere of fear and apprehension within many immigrant communities.
“Legal and otherwise, immigrants, long a pillar of growth in homebuying, are no longer feeling the warm welcome and optimism necessary for their biggest purchase,” Bloomberg Housing news reporter Prashant Gopal said. “President Donald Trump’s immigration policies are creating panic in many who believed that their American dream was within sight.”
Many are choosing to wait, even those in the U.S. legally. Immigrants who marry U.S. citizens worry about obtaining a permanent green card, and are loath to commit funds toward a home purchase due to the current climate. Even immigrants with high-paying jobs and valid visas are rattled, many giving up on trying to become homeowners because they don’t know what new laws may pass, affecting their resident status and job situation.
"We don't know which way it will go, but if Trump keeps making it hard for people from overseas, the housing market will take a hit," Alain Pinel Realtors broker associate Nomita Shahani said.
Does the Buck Stop Here?
Talk of recession is growing. Nationally, the foreign losses in tourism and the housing market alone will be in the billions, although experts do not foresee an irrevocable impact throughout most industries — but local Miami analysts expect the loss of overseas visitors and international investment comprising most of South Florida’s economy to become crippling.
According to the Miami Association of Realtors, foreign buyers have contributed heavily to the success of the residential and luxury markets, accounting for 36 percent of Miami, and 60 percent of South Florida area 2016 sales, paying an average of $600,000 for a residence, in contrast to the $350,000 median area price. Nearly two thirds of residential real estate in Miami and neighboring jurisdictions is foreign owned, much of it by Brazilian, Argentinian, Colombian, and Venezuelan investors, who, having dominated the market for years, are declining in the thousands.
The cause? Initially, the sales slowdown was blamed on the economic woes in Latin America, as many potential Latin investors are sidelined, waiting for their currencies to strengthen. Most Miami real estate agents expect those buyers to return, even with the current political climate, and as the prevalent gospel dictates — Miami real estate is a stable, long term investment unavailable in their own countries. But now, immigration reform has introduced another malaise upon foreign investor confidence.
“A very large percentage of our buyers are from South America. They invest not only because they love Miami’s lifestyle but also because the United States is a secure country,” Related Group CEO Jorge Perez said. “Uncertainty is a big deterrent to investment, and we’ve had to reassure our clients that in our opinion there will be no increased restrictions on visas or ownership requirements for foreign buyers.”
To Be, Or Not To Be?
So, the current question is whether or not Trump’s current crop of political actions and disparaging remarks against Hispanics, Muslims and other minority groups will further impact foreign investment in South Florida luxury real estate, which has been experiencing a general breakdown of the market due to a decline in resales and an overabundant supply.
The bullhorn has been blaring the same sentiment, over and over again: Trump’s anti-immigration stance, travel ban, limitation of tourist freedoms, and general hostility toward foreigners is seen as a sign of disquiet, dampening enthusiasm for Miami investments, while also, in a larger sense, dealing a severe blow to the U.S. economy.
“The market likes clarity and consistency, and there will be a pause until the market understands Trump’s economic and immigration plan,” Marcus & Millichap Broker and Senior Vice President Alex Zylberglait said.
“Stricter immigration laws have constrained the investor pipeline, and the travel ban has ramped up anti-immigrant sentiments, which may lower immigration numbers and, consequently, foreign investment contributions,” Zylberglait said. “This will hurt deals. Investors are people and they go where they feel welcome.”
Break on Through to the Other Side.
There exists an opposite contingent who believe Trump’s immigration policies, although a cause for concern, will have little affect on foreign investment in South Florida. These experts are quick to point out that Miami will remain a pivotal repository for Latin Americans seeking properties, due to the strength of the U.S. economy and the safety of its borders. More importantly, that Trump has no problem with foreigners who are legally living or investing in the U.S.
“While our largest market, the Latin Americans, may be offended by Mr. Trump’s rhetoric, they will make investment decisions based on the strength of our economy, not his personality,” Bilzin Sumberg real estate group attorney and chair James Sindell said.
“Most of the Latin Americans that invest in Miami do not come to the country illegally,” Sindell said. “The type of buyers that invest in Miami real estate are the immigrants that a Trump administration will most likely incentivize to come live and invest in the U.S.”
Immigration & The Comfort of Money.
In many reports, South Florida real estate analysts hammer the same facts repetitively: 1) That many Latin Americans have temporarily suspended investment activity due to anxieties over what is happening economically in their own countries, rather than over phobias about U. S. political issues. 2) That they see Miami real estate as a protective asset. 3) That they feel comfortable investing capital—and will continue to do so.
According to Mark Meland, a partner at Meland, Russin and Budwick, Trump’s immigration policy is not a primary concern, rather, Latin American investors are paying attention to the strength of the U.S. dollar, and the stability of the U.S. economy, relative to their own situation abroad.
“While some foreign buyers may be investing for immigration purposes, i.e. EB-5 investments, most are investing in the U.S. for the stability of the market,” Meland said, “as a hedge against currency fluctuations/devaluations and inflation in their own native countries.”
The U.S. Citizenship and Immigration Service maintains the immigrant investor program known as EB-5, making it possible for foreign buyers who agree to invest at least $500,000 to receive green cards for themselves and family members under 21.
The Trump administration is considering a change to the EB-5 program, raising the minimum investment amount to $800,000, although experts don’t expect this to affect wealthy Latin American investors as much as implementing guidelines making travel, immigration, and investment precarious.
The general consensus is that Trump, as a developer, obviously knows the value of real estate, likes international money, and won’t establish business-restrictive immigration policies.
There’s No Easy Answer Here.
Immigration agendas aside, principally, the flow of money is what is at stake, and the real estate market pinwheels around every other market — financial markets are all interconnected, and can be just as strong or as vulnerable as our policies and practices allow them to be.
Which leads us back to the topic of economic uncertainty. The driving concern of the Trump administration is to increase national security, and bolster the U.S. economy by removing all opportunities for illegal immigrants to take that slice of American pie that should benefit only citizens. Taken as a larger concept, it isn’t all that hard to understand, but unfortunately, the reality of the situation can’t be easily reduced to such simplistic elements.
Whether Trump’s immigration orders will ultimately railroad our economy, and derail the Miami real estate market is unknown at this point, but most experts acknowledge the possible negative impact upon Latin Americans and other foreigners ready to invest themselves and their funds in the U.S.
“The uncertainty of Trump’s presidency and implementation of immigration laws will likely raise more questions for Latin American and other foreign investors,” South Florida real estate analyst Jack McCabe said. “We are headed for a very volatile period in the future, especially in the luxury real estate section.”
“The country was likely heading into a recession in 2017 no matter who was elected, but the uncertainty of a Trump presidency will accelerate it,” McCabe said. “There is a tremendous amount of concern from different countries about how his policies are going to affect global economics.”