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How will President Trump affect GCC construction?

There will be plenty of uncertainty for Middle East construction and property markets now that a Trump presidency is imminent, experts say.

After Donald Trump secured the US presidency on Wednesday, 9 November, 2016, many industry commentators were unclear on how his new administration is likely to affect construction and real estate markets in the GCC.

David Godchaux, chief executive officer of Core, UAE associate of Savills, told Construction Week: “We have to exercise prudence at this stage.”

Godchaux pointed out that there is always uncertainty after elections, and that this is likely to be more pronounced given the surprise nature of the result.

“Any uncertainty, in general, always has a negative impact on stock markets, which usually translates over the mid-term into something positive for asset classes or commodities,” he continued.

“Typically, when there is insecurity, you have a shift from stock markets to other asset classes, and real estate is one of those that benefits from it.”

Godchaux explained that certain markets, such as Dubai, could become ‘safe havens’ for businesses.

“Paradoxically, it may have a positive impact on the real estate market for that reason,” he added.

David Clifton, regional development director for Faithful+Gould, is of a similar mindset.

“Safe commodities will probably continue to rise in the short term,” he explained.

Clifton was not convinced that the construction market would be overtly affected in this region, especially in the short term. However, he also pointed out that a long-term weakening of the US economy could have an impact on the region – where currencies are pegged to the dollar.

He continued: “Heavy weakening of the US dollar would cause potential inflationary pressures for materials. and even for salaries, as the majority of the workforce is expatriate and remits a proportion of their salary.”

Nevertheless, Clifton emphasised that it is unlikely this will occur in the short term, and that contracting markets for construction are likely to continue relatively unchanged, due to government cut backs. In this case, inflationary pressure is more likely to come from the introduction of VAT in 2018, he said.

Daniel Xu, senior legal consultant for DLA Piper, is not of the opinion that the GCC construction sector will face any real challenges in the coming months.

He said: “While the full effects of the transition will only become clear over the next few months, in the short term, it will be business as usual for the UAE construction industry.

“[This sector] is sufficiently robust and diverse, and there is a healthy pipeline of projects lined up for the next few years in respect of major events in the region.”

Meanwhile, Mahvish Gul, professor of economics at American University Dubai (AUD), said last week that a Trump presidency “will bring changes” and that Middle East countries should be “watchful” of his political stances.

She also warned that his strong opinions in the past may hinder smooth exchange of human capital, ideas and trade, and would ultimately have an adverse effect on US exports if he chooses to stand by his past comments and ideology.

Overall, those in the industry will definitely be watching the GCC construction and real estate markets carefully during the coming months.

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