The View | Could Asian and European real estate benefit from heightened US risks?

When US President Donald Trump unveiled his sweeping “reciprocal” trade tariffs on April 2, prompting swift retaliation from China and triggering a full-blown trade war between the two countries, Asia’s economies quickly came under the spotlight. Societe Generale said that “it is not exactly surprising Asia has been targeted the most among regions given its large surpluses over the US and its leading role in global manufacturing supply chains”.

Yet no sooner did concerns about Asia’s vulnerability to the onslaught of protectionism intensify than worries about the United States itself took hold. Sharp and rapid declines in the US dollar and Treasury bonds – core financial assets that usually provide a refuge for investors in times of turmoil – and growing unease about the dramatic deterioration in standards of governance have cast doubt on America’s role as a safe haven.

In property markets, these concerns are more difficult to assess and quantify. Unlike financial assets, real estate is illiquid. However, even before Trump launched his assault on the global trading system, America’s appeal as a destination for overseas tourists and international students was beginning to suffer.

Last month, arrivals of foreign nationals at US airports fell almost 10 per cent in annualised terms, fanning fears that the US could lose billions of dollars of revenue from a decline in foreign tourism and boycotts of US products. The share price of an index of US hotel real estate investment trusts (Reits) is down 24 per cent this year, compared with a 2.2 per cent fall for the broad-based index of US Reits.

In the 2023-24 academic year, the number of international students at US colleges and universities reached 1.1 million, with China still the top source for undergraduates. Last month, NAFSA, an association of international educators, warned that visa revocations and actions targeting foreign students “will likely result in prospective students choosing to study elsewhere”.

Trump is pushing talent and tourists away at a time when foreign homebuyers have retreated from the US market. Between April 2023 and March 2024, foreign buyers bought just US$42 billion of US homes, the lowest level on record, according to National Association of Realtors data.