As US home sales soared in September to levels not seen in more than 14 years, a hard-fought election battle has seen democrat Joe Biden selected as president-elect. Seen as more open to foreign investors, renters and immigration, the new president could introduce wide ranging changes to housing policy which will have an impact on investing in the USA.
While of course, the makeup of the senate may limit hugely dramatic policy changes, we explore what the election result could mean for the housing market in the USA.
A friendlier approach to foreign investors
It’s very much expected that president-elect Joe Biden will be far more welcoming to overseas investors than his predecessor Donald Trump, which will no doubt be welcome news to investors wishing to take advantage of what is one of the most established and stable housing markets globally.
After four difficult years for international relations under President Donald Trump, a Joe Biden presidency could see Chinese investors return to the market. The US-China trade war has dealt a blow to investments in US property by Chinese investors. The volume of purchases of US homes by Chinese buyers in 2020 stood at US$11.5 billion, or just about a third of levels seen in 2017, when Trump took office, and the numbers started a three-year decline, according to National Association of Realtors data. The number of purchases has also plummeted this year, by more than half from 40,600 in 2017 to 18,400 transactions.
It’s likely that, under the new regime, investors in Democrat-dominated “blue states” such as New York, Connecticut and California could make significant savings on property tax, as Biden was likely to repeal a rule that prevents people from itemising the tax as an expense, which could see house prices rise.
However, where the previous president was likely to attempt to reduce the capital gains tax rate, left leaning Biden would like to see it increase for those earning over US$1 million. It is said that Biden has intentions to limit the policy tool 1031 Exchanges, which allows real estate investors to defer capital gains taxes by directing the sale proceeds into new investments, to taxpayers with annual incomes of less than US$400,000 per year. The president-elect also intended to reform the Opportunity Zones programme, which offers tax breaks to developers that invest in designated areas.
One of the central planks of Biden’s $640 billion housing plan, which his campaign dropped in February, has been to help more Americans become homeowners. Now that he’s president, he has the opportunity to turn that high-flying plan into reality as he tries to heal the divisions within the nation.
He plans to give first-time homebuyers a down payment tax credit of up to $15,000 that they could use at the time of purchase. As home prices have soared in recent years, this could be a big help to many cash-strapped buyers.
More buyers in the market tends to lead to a more stable, growing market.
So if you’re considering investing in the USA – now may be the best time to come out of a “wait and see” position, and dive in while it’s still incredibly attractive.