2017 Predictions (and 2016 look-back)
12-30-2016
PropertyInvesting.net team
2017 Predictions (and 2016 look-back)
More objective guidance and insights for property investors. Our aim is to help you improve your investment returns, flag key risk areas and stimulate strategic thought so you can position your portfolio to maximize gains, for the thousands of daily visitors to the website and the thousands of people signed up to your Newsletter. This Newsletter covers two topics:
1: 2017 Predictions and takes a Look-back Review of our 2016 Predictions for good order
2: Trump - global economic directions moving into 2017
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1: 2017 Predictions and takes a Look-back Review of our 2016 Predictions for good order
We start with our view on 2017 property prices in the UK followed by economic criteria. We’ve been performing this analysis for the last ten years now. All our previous predictions can be reviewed on the website in our Special Reports section, so you can judge for yourself how accurate we have been.
557: 2016 Prediction (and 2015 look-back) 
553: 2015 Prediction (and 2014 look-back)
496: 2014 Prediction (and 2013 look-back)
456: 2013 Prediction (and 2012 look-back)
409: 2012 Prediction (and 2011 look-back)
356: 2011 Prediction (and 2010 look-back)
301 2010 Prediction (and 2009 look-back)
245 2009 Prediction (and 2008 look-back)
179 2008 House Price Predictions – Global
102 Property Price and Economic Predictions for 2007
For 2017, there will be a number of criteria that will pull property prices one way or the other, which we outline below:
Positive Criteria for Property Prices in 2017
· Low - albeit rising - oil prices continue to stimulate the economy and financial markets
· 
Severe lack of house building, particularly due to Brexit making builders more risk averse and raising building costs
· Strong rental market due to buy-to-let property shortages particularly in London and southern England
· London likely to continue to boom with expanding population and inward migration despite the Brexit doom-mongers
· Booming UK population, birth rate and immigration – with subdued emigration
· Pent up demand from years of low market activity 2008-2012 – people needing to move
· Continuing flood of wealthy global citizens escaping economic proble
ms – in 2017 - this is likely to be from Germany/France (tensions with Russia, terrorism, election outcome), Syria (war), mainland Europe (escaping poor jobs prospects), France and China (fear of government asset seizures, hedging)
· Elizabeth Line (Crossrail 1) to open in London 2017-2019 – possible Crossrail 2
Negative Criteria for Property Prices in 2017
· Slightly less competitive and less abundant mortgages with possible interest rates rises required to defend the weakened Sterling
· Global economic slowdown and slightly reduced trade with Europe
· High levels of debt spending in western countries
· 
Ramifications of the punitive taxation of buy-to-let - driving rents higher and making it far more difficult for renters to get deposits to become owner occupiers
· Currency fluctuations and confidence post Brexit Referendum affecting the property market
· Continued public sector jobs losses particularly in areas exposed to these jobs - such as rural areas and northern/western areas in Britain
· High levels of deposits required even with "help-to-buy" measures – increases in deposits for buy-to-let are likely after the draconian new buy-to-let tax measures announced 2015-2016
· Difficulty getting mortgages for the average person even with "help-to-buy" measures
· Low lending to salary multiples offered by banks
· The threat of terrorism particularly in Greater London
· Lower oil prices effecting Aberdeen and NE Scotland property market
Overall, we believe the positive factor more or less cancel out the negative factors and as the UK economy continues to grow, stability from the Tory majority government and massively booming population with little building will lead to more house price increases despite Brexit – except in Central London. The ripple effect will continue to fan out from London – moving through places like Leicester/Derby, Birmingham, Manchester, Leeds. The largest house price increase are likely to be in areas 75-125 miles from London, with housing shortages in East England driving prices up. Large increases in house prices are expected in London’s lower priced suburbs like Ilford, Dagenham, Milton Keynes, Hatfield and Essex and eastern Kent - catching up with the rest of London. Some areas like Acton, Abbey Wood, Forest Gate, Ealing and Paddington will benefit from the opening of the Elizabeth Line (Crossrail 1).
2017 Predictions
Property Price Predictions
1. London +1% (West London -1%)
2. SE England +3%
3. East Anglia +2%
4. Scotland -1%
5. SW England +3%
6. NW England +2%
7. Midlands +2% (East Midlands +3%)
8. Wales +1%
9. North England +1%
10.
Northern Ireland -1%
11. Yorkshire +1%
Note: Published CPI and RPI inflation will be ~2.2% (though real inflation will be more like 2.8%).
Rents
These will rise above house price inflation as buy-to-let tax increases and stamp duty on buy-to-let property will lead to far lower investment in private rental property, and higher costs for landlords - hence driving rents up as all these measures worsen the housing crisis and tighten further the rental supply.
Other criteria
· US Dollar to the UK $1.7 / £1 – Dollar increases slightly against Sterling
· UK £
to the Euro £1 / 0.88 Euro – Euro-Sterling track fairly closely in 2016
· Oil price start the year at $52bbl, rising to $63/bbl by end 2017
· UK Gas remains firm at price 43p/therm
· UK Interest Rates – one interest rate increase of 0.25% forecast for 2017 though there could also be more currency printing despite a slight increase in interest rates
· FTSE100 index stays around 7000, same as 2016
· UK Inflation CPI starts year rising from 1.1% to 2.8% by end 2017 – largely due to increases in oil price and Sterling value erosion (more expensive imports)
· UK GDP stays around 2.0% - continuing the existing trend – driven by population increases
· Ongoing security situation continued to be grave in NW Iraq and eastern Syria though improving towards end 2017 as Russian and other forces erode ISIS control over the desert territo
ry – Assad remains in power supported by Putin. Tensions between Saudi Arabia and Iran continue. SE Ukraine continues to quieten down, Yemen problems continue. Possible advance-tensions in eastern Estonia (Russian border). US support for Israel increases - worsening the tensions in Levant. US reverses course on Iranian sanction - amid concerns on their nuclear ambitions. North Korea and US confront each other over North Korea's nuclear ambitions. Hotspots being US-North Korea, US-China (South China Sea), US-Iran, Israel-Palestine, Russia-US-Syria-Turkey.
· Euro interest rates – staying at record lows throughout 2017 (deflation threat, leading to continued bond purchases)
· US Interest rates stay the same through 2017 (after rising slightly Dec 2016) - with possible QE4 if US economy slows down
· UK unemployment – stays around 5.5%
· Wage inflation – ~2.2% throughout 2017 in both private and public sectors
· GDP growth London 3.2%, North 1.0%, Midlands 1.7%, Scotland 0.2%. Wales 0.5% (overall 2.0% for 2017)
· 
GDP China 5%, GDP India 6.5%, GDP Africa 2%, Global GDP 2.2%, UK 2.0%, USA 3.1%, Euroland 1.3% - as a whole over 2017
· Gold stays around $1250/ounce level, silver stays at $16/ounce level
USA debt situation - Low oil prices albeit rising and higher GDP growth improve US finances over 2016 – even though debt levels remain very high and increasing. Dollar value remains well supported by higher growth and newly found shale-oil that is economic at prices above $50/bbl. Trump starts spending spree on infra-structure and military. Trump reduces taxes for the top wealth 35% that boosts the US economy and spending.
Inflation – Increases due to higher oil prices – in the UK this will mean interest rates may rise particularly if Sterling declines to levels deemed very inflationary (e.g. £1 = $1).
Greece, Portugal, Ireland, Spain and Italy – finances continue to improve slowly albeit the pace weakens as oil prices rise increasing oil import costs. German economy is hit by confidence prior to the German elections and tensions with Russia – and possible Euro zone break-up – referendum in other countries.
Russia: The sanctions, low oil prices and financial stresses lead to recession and more pressure on President Putin – who expands military efforts to boost/maintain popularity at home.
Eastern Estonia could be another target for subversive or outright territorial invasion. Ukraine rumbling away at low level, with real focus being on Syria/NE Iraq for 2016.
Middle East: House of Saud finances improve slightly as oil prices rise from $52/bbl to $60/bbl – though budget does not balance until oil prices are around $90/bbl. Continued tensions with Iran and ISIS insurgency in the region. Middle East and North Africa continue to be unstable with bad situations continuing in Libya and Yemen.
BRIC: Brazil economy starts slow improvement as oil and commodity prices rise (Petrobras escapes default for now) – 3% GDP growth. Indian economy continues to boom off the back of global trade with western nations and gigantic population explosion – 6% GDP growth.
China South China Sea: Further military spats and escalations continue over disputed islands – this time with USA at the forefront – high risk of some sort of naval war between USA (Trump) and China over the islands.
Large bankruptcy: Bankruptcy or default in a number of European banks – in Italy, and possibly German, France and Spain.
The Trump Effect: Donald Trump will become more and more unpredictable. The USA's relationship with China and Venezuela in particularly will deteriorate. Initially his relationship with Russia will seem satisfactory but then this will also deteriorate by end 2017. It will be Presidential running of the US via Twitter - soundbites and often dangerous rhetoric. This will send gold and oil prices rising. A nuclear arms race will start in 2017 with big increases in military spending in USA, China and Russia. Putin and Trump and their egos will spar with each other more regularly towards the end of 2017. Global casualties of Trump's policies are likely to be China and Venezuela, also Iran and possibly Cuba, North Korea and other socialist countries. Trump's policies will inflame tensions in Israel and with the Palestinians. The Middle East is likely to feel threatened by Trump and his cohorts and policies.
Note: Just like last year’s prediction, sometime in the next 6 months to 4 years we expect a real economic-financial crisis in western developed nations caused by the US bond market meltdown. At this time, gold .JPG)
and silver prices will go ballistic (silver from $16/oz to $400/oz and gold from $1240/ounce to about $6400/ounce). The Dow Jones may rise, but inflation adjusted real terms will decline – still in an overall cyclical bear market.
UK Politics
Brexit negotiations to dominate the news – with disarray and huge arguments on what Brexit means, whether we should allow free movement of capital and people – and whether the UK should remain in the Customs Union or not – more and more likely to be a “hard” Brexit – an “acrimonious divorce”. Terresa May will be pulled left, right and centre – and will look more and more foolish in the world's eyes through 2017 – with possible resignations and replacement by Boris Johnson if pressure becomes too unbearable for her. SNP will keep threatening another Referendum, but this would not be worthwhile unless they saw oil prices higher than $100/bbl – this might embolden them. Meanwhile Labour will continue to shrivel and die as a pollical force as their policies are in disarray and Jeremy Corbyn's leadership results in the Labour party transforming into a protest party rather than a real opposition party. The Tories may have s snap election in 2017 - a 40% chance - particularly if they feel they need a mandate for a hard Brexit. In any case they can look forward to another 4 year term to 2020 with the outlook for the Tories very good moving into the 2020s – mainly because few people trust Labour with the economy, particularly with Corbyn as leader and the Brown legacy of financial mismanagement.
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Look-Back on 2016 Predictions
Property Price Predictions
1. London +4% (West London +2%) Actual -0.1 % (West London -2%) Brexit impacted
2. SE England +6.5% Actual 4.5%
3. East Anglia +8% Actual 6.4%
4. Scotland +0% Actual 0.0%
5. SW England +6% Actual 6.6%
6. NW England +4% Actual 2.7%
7. Midlands +6% Actual 5.0%
8. Wales +4% Actual 4.1%
9. North England +3% Actual 0.1%
10. Northern Ireland +6% Actual 0.5%
11. Yorkshire +3% Actual 1.8%
Note: Published CPI and RPI inflation will be ~0.5% (though real inflation will be more like 1.5%). Spot on – actual CPI inflation was 0.5%
Rents
These will rise rapidly above house price inflation as buy-to-let tax increases, stamp duty on buy-to-let property and lead to far lower investment in private rental property, and costs for landlords - hence driving 
rents up as these measures worsen the housing crisis. Correct – rents rose ~3%.
Other criteria
· US Dollar to the UK $1.47 / £1 – Dollar increases slightly against Sterling - Incorrect
· UK £ to the Euro £1 / 0.73 Euro – Euro-Sterling track fairly closely in 2016 – Sterling lost 10% of its value due to Brexit
· Oil price starts year at $37bbl, rising to $50/bbl by end 2016 – Oil prices dropped to $29/bbl in Jan 2016 then rose to 52$/bbl by end 2016 – correct.
· UK Gas price 38p/therm – Gas prices recovered to 40p/them by end 2016 - correct
· UK Interest Rates – staying at 0.5% throughout year - equally likely to print money as increase interest rates – Correct – spot on
· FTSE100 index stays in range 6000-6300 – FTSE100 rose to 7000 mainly due to Brexit currency value reduction
· UK Inflation CPI starts year at 0% then rises to 0.5% by end 2016 - correct
· UK GDP staying around 2.5% - continuing existing trend – Correct (despite Brexit, still growing at 2% per annum by end 2016)
· Ongoing security situation stays grave in NE Iraq and eastern Syria – with US/French/UK/Russian and Middle Eastern coalition forces weakening ISIS. Tensions between Saudi Arabia and Iran. SE Ukraine continues to quieten down, Yemen problems continue. Possible advance into eastern Estonia. All Correct.
· Euro interest rates – staying at record lows throughout 2015 (deflation threat, leading to continued bond purchases) - Correct
· US Interest rates stay the same after rise mid Dec 2015 – possible QE4 if US economy slows down – Almost correct, only rose a meagre 0.25% in Dec 2016
· UK unemployment – stays around 5.5% - Correct
· Wage inflation – ~2.6% throughout 2015 in both private and public sectors - Correct
· 
GDP growth London 4.5%, North 1.5%, Midlands 2.1%, Scotland 0%. Wales 1.5% (overall 2.4% for 2015) - Correct
· GDP China 4%, GDP India 5.5%, GDP Africa 1%, Global GDP 2%, UK 2.5%, USA 2.2%, Euroland 1% - as a whole over 2016 - Correct
· Gold stays around $1090/ounce level, silver stays at $14/ounce level – rose to $1130/ounce by year end (silver $15.80/ounce)
USA debt situation - lower oil prices and higher GDP growth improve US finances over 2016 – even though debt levels remain very high. Dollar value remains well supported by higher growth and newly found shale-oil that is economic at prices above $50/bbl. Correct
Inflation – very subdued because of crash in oil prices – in the UK this will mean interest rates do not need to rise as soon as they would otherwise. Correct.
Greece, Portugal, Ireland, Spain and Italy – finances continue to improve getting a boost from low oil prices and reduced oil import costs. German economy is hit by lower trade with Russia, though lower oil prices feeding through to lower inflation leads to financial services performing better than expected. Broadly correct.
Russia: The sanctions, low oil prices and financial stresses lead to recession and more pressure on President Putin – who expands military efforts to boost/maintain popularity at home. Eastern Estonia could be another target for subversive or outright territorial invasion. Ukraine rumbling away at low level, with real focus being on Syria/NE Iraq for 2016. Absolutely Correct.
Middle East: House of Saud under huge pressure from low oil prices, tensions with Iran and ISIS insurgency in the region. Middle East and North Africa becomes more unstable with worsening situation in Libya, Yemen and Saudi. Correct – Saudi capitulated in Nov and agreed to cut oil production to raise oil prices.
BRIC: Brazil economy continues to suffers from high debt at Petrobras (possible Petrobras default) – 2% GDP growth only. Indian economy booms off the back of lower oil prices and global trade with western nations – 6% GDP growth. Correct.
China South China Sea: Military spats continue over disputed islands – all the time risking escalation to war (China-Japan-US navy). Correct.
Large bankruptcy: Possible bankruptcy or default of Petrobras and Rosneft – suffering from ~$36/bbl oil prices and massive debts. Both respective government are unable to bail them out. Indeed, Brazil pressure mounted and political turmoil – with indictments in Petronas and government – over correction allegations
Note: Just like last year’s prediction, sometime in the next 6 months to 5 years we expect a real economic-financial crisis in western developed nations caused by the US bond market meltdown. At this time, gold and silver prices will go ballistic (silver from $14/oz to $400/oz and gold from $1080/oz to about $6400/oz. The Dow Jones may rise, but inflation adjusted real terms will decline – still in an overall cyclical bear market. No crisis just yet – was not really predicted in 2016.
UK Politics
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The EU Referendum will take place mid 2016 – it will be a very close run result and its too uncertain to call – 50/50 either way. Correct – voted for Brexit 52% to 48% despite media hype saying 85% chance of Remain winning.
If the UK leaves the EU, then the SNP will demand another Referendum – then they would leave the UK by end 2017. If the UK stays in the EU, SNP are likely to continue within the Union. The Tories will campaign on keeping within the EU and keeping the Union together. They only have 50% chance of success. Meanwhile Labour will continue to implode - with Jeremy Corbyn's leadership resulting in the Labour party transforming into a protest party rather than a real op.JPG)
position. With SNP assent and Labour demise, regardless of a Scottish Referendum, Tories line up for another 5 year term in 2020. All correct.
The economic scenario most likely to be beneficial is staying within the EU - though this is also uncertain and would depend on whether the Tory government reacted by implementing business friendly policies post Brexit that would entice large foreign investment flows from around the world to offset less EU trade. Thought to be correct at this time - time will tell.
2: Trump - global economic directions moving into 2017
Changes: Donald Trump’s election will significantly change the world economic and foreign policy for the USA and all countries in the world. There is likely to be major ramifications from these changes in the next few years.
Protest Vote Against Socio-Liberal Elite: The ruling Obama liberal elite – along with the Clinton clan are being kicked out by the US electorate. Regardless of your political views, one thing for sure is that under the Obama and Clinton watch, we had wholesale destruction in Syria, Iraq, Libya, Egypt for a while, and Yemen. There has been the rise of Russia as a military threat – with the annexisation of Crimea and the ongoing Ukraine war – off the back of the threat that Ukraine would join NATO and EU interference. We cannot think of one foreign policy success under Clinton’s tenure – just a degradation of situations around the world resulting in the rise of ISIS.
War – Disasters: Other notable disasters have been the capitulation to Iran over their nuclear ambitions, sanctions on Russia that seem to have emboldened Putin, and China building militarized islands in the South China Sea – all whilst Obama and Clinton watched on, with Perry being ineffective against the Russians and the USA, Europe and NATO looking increasingly foolish.
Bigger Disaster? We now have a sea-change in strategy and administration – and it’s quite possible Trump will be an even bigger disaster – but we will have to wait and see. It’s worth noting a few trends in the US Administration that might affect property investors in the medium and long-term – both those based in the USA and those in the UK.
China – there will be huge tensions between the USA and China over the militarization of the South China Sea Islands. Donald Trump will be wielding his weight on this issue – and it could lead to war or at least China and USA shooting at each other for a period of time, gin-boats ramming each other. Trump might even demand China move off the islands – this would certainly raise the spectra of war. Trump may threaten to put import tariffs on Chinese goods if they don’t move off the islands. There looks likely to be at least a trade war. Trump is a property developer. China are building islands from submerged sand-banks - getting into the Trump psyche - he will want those islands for himself. He will feel very envious of this Chinese development and want to put a stop to it, especially as it threatens what he considers to be a US shipping corridor. We have been warning for years about the threat escalating from China's insistence on 
developing these islands and claiming the whole area for themselves - and we see this as a big flash-point now that Trump is about to come into power.
Business – beyond any doubt, Trump is pro-business. He surrounds himself with business associates. He does want to get the American people back to work – not just low paid part time jobs in Starbucks, but real jobs in manufacturing. He will do this by:
· Boosting oil and gas related jobs – more fraccing and oil leasing - more oil rigs operating
· Getting coal miners back in business after Obama destroyed them with environmental legislation and lack of pollical support
· Boosting manufacturing jobs by providing very low cost energy – electricity and gas power – through the expanded oil/gas industry in Texas, Oklahoma and North Dakota etc.
· Pulling out of climate change agreements and reducing regulation
Hi-tech: Trump will also be wanting to keep the hi-tech businesses in California growing – he will encourage these though will be tampering with their power – he will want to control and use social media to improve his ratings and will put pressure on hi-tech companies to back him and not the liberal elite and 
democrats. This interference will be un-democratic – and lead to a more autocratic US society. It will be a marriage of convenience – Trump does not really like hi-tech nerdy types and "hipsters", but he knows how important these people are for tax revenues, jobs and keeping the US competitively “ahead of the pack”. He won’t want to attack them too much. Indeed, he spends most of his early mornings on Twitter – creating the next news threads!
Russia: Trump will cosy up to Putin for a while anyway, but both men have huge egos – and we think eventually there will be a trigger that makes them lose friendship. Putin wants to use Trump for his vested interests – and Trump will want to use Putin – but we think after a few years they will fall out over something and the outcome could regrettably be war. Its certainly a high-risk relationship. Both men want to use business and oil to make money and grow their oligarchies – initially there is likely to be more US investment in the Russian oil business – but it is likely to end in tears when these assets are seized (again) by Putin – like he did with Yukos, Sakhalin and BPs huge TKN assets. Its going to be ugly.
Building: Trump will want to get the US building again, sky-scrapers, roads, rail, pipelines, infra-structure, airports – the level of public debt will likely rise as he encourages private-public partnerships to boost jobs and building. Lets face it – Trump is a property developer – and he will like nothing more than visiting huge building sites and feeling important. He wants to make 
American great again – and building is part of this masterplan and ethos. Expect big changes in NE USA in particularly – New York and the Rust Belt. All those unemployed people scraping by in the Rust Belt states are the ones who voted Trump in – in these swing states – and he won’t want to let them down.
Private Business and Public Sector: There will be a big blurring of private and public sectors during Trump's tenure. It will look to many like a merger. Of cause when the business and government merge – by definition - this is facism. We are not saying the US will become a facist state – its more the case that there will be a big shift from the general trend of:
Regulation and Interference: Liberal politicians beating up business and making it awkward for them to invest with regulations and oversight – to a more free ranging growth in business as the government generally takes more of a hands-off approach – as long as these business are seen to support Trump. If they are seen to undermine Trump and his policies – he will then attack these companies – a bit like a bully. Rather similar to Putin’s attack on Yukos after their CEO did not agree with his politics and openly criticized Putin (he ended up in jail).
Government: Trump will surround himself with powerful business people that he knows are all his strong loyal supporters. He will not tolerate anyone saying anything negative about him – otherwise they will be out or even worse, end up in jail. We believe he will have a very autocratic style when compared to Obama. Yes – this will get things going in business – but eventually we see trouble – probably in the foreign policy department and the outcomes would most likely be more wars.
Nixonian: It’s worth noting that one of Trump’s heroes is Richard Nixon. He particularly likes one of Nixon’s trait that he was unpredictable. He likes unpredictability and thinks there should be more unpredictability. Looking at things through Trumps eyes, he probably thinks over the last years – the USA’s Foreign Policy has been so predictable this has made the US less safe because of it – played into the hands of USA’s enemies – be these terrorists or rogue governments. Of course people could easily say the predictability of leaders like Merkel, Obama and Cameron have been good for peace, not bad – certainly if you live in South Korea or Estonia – you need to know you can rely on special relationships.
Kissinger: The other person Trump admires is Henry Kissinger. He wants his State Secretary to be like Kissinger – a man who could almost predict future events and help shape the downfall of the Soviet Union and rise of Israel as a state. So expect his next State Secretary to be are rather Kissenger type figure – good at working with alliances to shape world events, with Trump being the unpredictable person stirring things up.
Mexico: We think Trump will go a bit soft on Mexico since they are close neighbours, with a lot of business between the countries. But he will try and shift many of the Mexican jobs – e.g. automotive – back to the USA.
Venezuela: Though Trump has not really mentioned this country yet, he and his subordinates would probably love to get their mitts on the 220 billion bbls of heavy crude sitting idle in this country – Venezuela have the largest oil reserves in the world. The US oil men could easily boost production in Venezuela using conventional technology and capital – after the 18 years of gross mismanagement under Chavez and his successors – from the current rate of 1.8 million bbls to something like 6 million bbls. As the country descents into anarchy with hyperinflation, as it currently is doing – Trump may seize on this opportunity to “liberate the socialist country” in some form or other. This one is scary, but don’t be surprized if Trump gets involved in Venezuela – even if it’s just oil deals – or blocking oil deals. Note: Venezuela imports US refined products to keep their heavy oil flowing (it's call diluent) since their refineries are almost shut-down. So Trump could threaten to pull the plug on refined oil sales that would therefore crash the Venezuela oil production further and wreck their economy even more. So don’t be surprized to hear that the US threatening to ban refined production (diluent) sales unless the Venezuelan give oil assets to the States in return. He probably thinks Obama gave them far too much support, and he won’t like it that Venezuela over the years was such a thorn in the US’s side, also working against the USA with other South American countries with their populist socialist anti-US rhetoric.
Republicans: Most Republicans never took Trump seriously, never believed he would gain the Republican nomination, never mind win the Presidency. They were also confused why he stood as a Republican since many of his policies differed in values – and many people thought Trump should be an Independent. Many Republicans also thought Trump hi-jacked the Republican Party in early 20
16 – and are now coming along for the ride since he has of course successfully won the US Election. But a word of warning. Waiting in the wings are characters like Pence – who many regard as far more extreme. He is strongly anti-abortion, anti-gay, anti-immigration and a far right winger. Trump seems rather ambivalent to many of these things - he seems more interested in business and ego boosting speeches – but Pence would likely shift the US even further right. If Trump falls on his sword – then Pence is there waiting in the wings with a strong backing from traditional Republicans – very scary.
In summary, as Trump’s policies take effect – we are likely to see massive additional government spending, probably off the back of money printing and increasing government debt – which should send US debt from around 105% of GDP to something like 125% in four years. The brief dollar rally off the back of the early December interest rate rise and Fed promises of further rises in 2017 will soon fade out – and be replaced by a dollar slide as dollar currency printing starts, Trump upsets foreign investors and Trump puts pressure on the Fed to reduce interest rates to boost the economy – as it will rapidly become obvious that the large US banks cannot handle any further interest rate rises. When this outcome kicks-in – by around end March 2017, we think gold prices will shift up from $1130/ounce to more like $1300/ounce and oil prices will rise to $60/bbl – as the dollar declines against the major currencies like the Yen and Euro.
2017 is shaping up to be a very interesting year – we have elections in France, Germany – Trump consolidating power, Putin flexing his muscles and Russia’s interference in the Middle East expanding. Potential trouble spots are:
· Turkey-Syria
· South China Sea
· North Korea
· Iran - Saudi tensions (proxy war expansion)
For property investors in the UK – despite the uncertainty with Brexit and our special relationships with the USA and Europe under threat – we think property investment in London and some of the major English cities is still worthwhile.
Hipster Hotspots: For London – we would advice “Hipster Hotspots” like Shoreditch, Forest Gate, Borough, Acton, Kennington, Limehouse, Hackney and Soho-Bloomsbury. The cheaper parts of Central London. This is not much different to our advice we have been giving for the last 12 years. These areas will all see prices rise as inflation takes hold, the Bank of England continues to print currency and global investors continue to see London as a safe haven – an offshore haven – in this uncertain world. Although the UK is no longer the military power is was, it is still the third biggest military spender in the world after USA and China.
USA: In the USA - property prices in Trump's home-ground will likely rise - in places like New York, New England and Pitsburg. Texas and North Dakota - key oil industry areas will also prosper off the back of increasing oil drilling and fraccing.
We hope this Newsletter helps with your property investment strategy and tactics and has been helpful in giving insights into the economic and social direction for 2017. If you have any queries, please contact us on enquiries@propertyinvesting.net