You don’t have to dig too deep to see how the Trump administration’s tariffs on China will likely impact the real estate industry. But the picture gets a little more complicated when you consider residential rental properties in particular.
To understand how the ongoing trade war is expected to impact independent landlords, it’s essential to consider a few other factors at play, including residential housing starts, current appetite for buying and renting homes and the potential economic impact of a long-term conflict.
Tariffs On Building Materials = Less Construction
While the full list of Chinese products that have tariffs is a 196-page document, those most relevant to the real estate industry include steel, aluminum, ceramic tiles, nickel, cement and other building essentials like caulking and painting components.
In the short term, the higher cost of building materials will likely mean less construction. Developers will be on the lookout for other suppliers, certainly, but regardless, the cost of materials will likely increase. That means developers are likely to take on smaller projects and put up fewer new buildings overall.
That could have three main impacts on independent landlords:
• A tighter supply of rental units, which could drive up rent prices, increasing income in the short term.
• Less opportunity to grow a portfolio of rental properties, which could limit long-term earning potential.
• Less opportunity for homebuyers, which could force would-be first-time homebuyers to rent for longer than planned — also a potential short-term win for landlords.
Even before these tariffs, though, U.S. housing starts were underwhelming, which could mean that last point deserves closer attention.