The Real Deal New York

Trump’s infrastructure plans may drive sell-off of government bonds, fears of interest-rate hikes

Commercial real estate may follow bond price drops

November 22, 2016 08:40AM

Donald Trump

Donald Trump

Concern is mounting that global commercial property values may plunge as bond prices drop and the specter of rising interest rates looms large.

Investors are selling off bonds in the U.S., Europe and Asia, signaling a possible decline in interest in commercial real estate worldwide, the Wall Street Journal reports. As investors turn to safer government bonds with stronger yields, demand — and therefore prices — for commercial real estate will likely drop off, reversing the trend of the past few years.

The shift can be partially attributed to President-elect Donald Trump and his plans to invest heavily in infrastructure, experts told the Journal. Investors are concerned that these plans will cause the Federal Reserve to raise interest rates even higher than expected. Since the election, mortgage rates have already risen rapidly.

“There is a danger in real-estate markets that, because of lower-for-longer policies…values have not been driven by fundamentals,” Chris Taylor, chief executive at the property arm of Hermes Investment Management, told the Journal. He added that Trump’s policies could “bring into sharper focus what’s been driving real-estate markets.” [WSJ]Kathryn Brenzel

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