Betting On the Wall, Will It Raise Or Lower Home Prices?
Talk of Trump’s Wall has Washington in a tizzy. Some see it as a disaster waiting to happen, others see enormous economic recovery, particularly in areas most heavily impacted by immigration – service staff, farming, day labor construction, and manufacturing. California wants to divest from companies that invest in The Wall, Texas says its Big Bend National Park will take an irreparable environmental hit, and the folks who live in Cochise County, Arizona, on the border with Mexico, will breathe a sigh of relief.
The Financial Times says Trump’s Border Wall will rise, and points to the sort of optimism that had one U.S. construction company’s stock price rising by almost 10 percent post-election based on nothing more than the Wall’s potential.
Wall Street calls this kind of stock jump “positive pressure”. In dog-speak, the gain in share price is the literal equivalent of drooling. Who wouldn’t, given the prospect of a 2,000-mile wall costing about $50 billion, employing 40,000 workers and lasting four full years?
If that were to happen, the first and most noticeable impact would be on rental properties, closely followed by housing and land prices as C-level employees choose to relocate to border cities like San Ysidro (California) or Laredo, Texas, rather than commuting.
The potential (for sellers) looks even better at the border as the peso sinks against the dollar, reaching an exchange rate of 19.084 per USD on March 22 – or less than a nickel per peso. This decline is not entirely tied to the Wall – the peso has halved against the dollar during the past five years.
Nonetheless, the peso’s gradual decline is welcome news to the 400,000 newly and suddenly affluent U.S. residents who want that second home, and are willing to forgo Cap d’Antibes, Turks and Caicos, Abu Dhabi – even Puerto Vallarta – for closer-to-home locations that are tropical, and near a beach, but also more affordable.
In fact, the newly cleaned and polished Ciudad Juarez (just across the border from El Paso, Texas) is starting to look pretty good to this nouveau rich crowd. In the last half decade, Juarez’s murder rate has dropped below that of New Orleans and Detroit, and the recent capture of Joaquin “El Chapo” Guzman has sent a message to drug lords and gangs that crime will not be tolerated.
On the other side of that equation, prosperous Americans may see gold in border cities, but cautious ones are concerned that Trump’s threatened suspension of NAFTA (the North American Free Trade Agreement) will also suspend the rule that allows American buyers to own property in Mexico.
This same concern is also prompting prosperous Mexicans and other Latin Americans to sell off their U.S.-based vacation/second homes, especially in the last several months, as Trump reiterates his intent to build a wall across the Mexican border. A word to the wise (or merely observant), the National Association of Realtors recently released figures showing that the percentage of Mexicans buying homes in the US fell from 7.9 percent in 2012 to 4.6 per cent last year.
One respected source notes that, if the wall goes up, border residents (on both sides) will feel safer, and property values will rise. Another realtor suggests that putting up a wall is like taking in the welcome mat, and border-wall real estate properties will suffer. Not to mention the proposed 20-percent tax on Mexican imports, which will put small but popular and so-far prosperous border businesses out of business.
Those Americans who are still brave (or foolhardy) enough to buy a vacation home in Mexico will be pleasantly surprised to learn that the cost of maintaining real estate is a mere 0.2 percent, as opposed to 1.8 percent of the property’s value in the U.S.
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