The trade war between the U.S. and China has been raising eyebrows in many sectors. As industries see prices on necessary materials increase, both businesses and consumers alike are feeling the repercussions.
While many discuss how the tariffs have impacted farming and agriculture, they’ve also made a mark on the real estate industry as well, especially for landlords.
Tariffs could impact rent, development and revenue
These are some factors for landlords to examine:
- More expensive building materials could mean costly construction: Real estate companies often use a variety of materials from China to develop their properties. Those can include steel, aluminum, nickel, cement and other building essentials. Increased prices of these goods can create a headache for landlords, as expensive materials can make construction and rent more expensive. This can make it difficult for landlords to develop more units, get new renters in the door and encourage current tenants to stay.
- Starter home shortage could create uncertainty: Despite the post-recession uptick starter homes saw in early 2018, they’ve seen a 4.7% decrease since then. This can create problems as the demand for starter homes is high, but there are not enough of them available for purchase. While these circumstances may be beneficial for landlords in the short-term, it could hurt them in the future if the housing market recovers and tenants leave rental properties in droves.
Implications for the future
Depending on how long the trade war continues, some economists predict it could reduce GDP and global economic output. If that’s the case, it could hurt various landlords’ rental prices, revenue streams and even the relationships they have with their tenants. While multiple factors are out of a landlord’s control at this point, they can prepare for what may lie ahead.
