Elections for government are major economic events that affect real estate markets. Especially for industrial property, the value often highly correlates with political stability and a new administration’s regulatory and economic policy agenda. In this article, we look at how government elections affect industrial property prices and, finally, the best way for industrial property management or industrial property buyers and sellers to ride out these disruptive events.
The Impact of Politics on the Value of Industrial Property
Investor confidence, regulatory frameworks, and economic stability—all are closely related to the political scenario, and so are the worth of industrial property. It is common for markets to react violently due to uncertainty behind potential policies when government elections take place. This political uncertainty can cause property values to rise or fall, which for industrial property, with its generally longer-term investment horizons, is less of a concern.
Particularly in the case of candidate’s platforms that touch on tax policy, environmental regulation, and zoning law, which directly impacts the management of industrial property, investors are paying close attention to them. Should the outcome of an election be a government dedicated to pro-business policies, this could increase demand for and prices of industrial properties for sale. On the flip side, a government with hardline environmental laws or higher business taxes may make investors wary and may result in lower property prices.
Change in the Policy and their Role in Industrial Property
Policy changes after elections are perhaps one of the biggest influences on the value of industrial property. Elected officials usher in new regulations that impact the industrial sector reliant upon manufacturing, logistics, or warehousing—all are heavily influenced by industrial property.
Critical policies that impact industrial concerns:
Corporate taxation: Corporate tax rates impact industrial profitability directly. A pro-business tax policy could bring more businesses to industrial parks, which will increase demand for industrials.
Environmental Regulation: Stricter environmental regulations may affect an industrial site by necessitating upgrades or modifications to achieve new compliance standards. This either drives up the cost of holding industrial assets or dissuades buyers for industrial assets for sale.
Transportation Infrastructure: Governments that invest in infrastructure or local road works to create better paths will increase the value of industrial properties as it increases accessibility and cuts down operational costs.
Industrial property management should remain cognizant of these possible changes in policy and adjust strategies accordingly. Proactive property managers that quickly adjust to changing regulations can stabilize the value of their assets — perhaps even promote their value.
The market uncertainty in response to elections
Elections are always an uncertain time for markets, which means volatility in October. Investors can delay purchase activity as they seek to determine what policies might go into effect, which can affect near-term demand as buyers may take a “wait-and-see” approach to looking for industrial properties for sale. Such a cautionary approach can mean that industrial property sits flat or slightly drops until the market has greater visibility on where the new administration will lead us politically.
However, in some situations, anticipation can lead to a spike in short-term activity. It would cause some investors to rush to buy the presale properties before the anticipated changes to regulation, creating a temporary lift in demand. If, for example, there are expectations of tougher zoning rules after the election, buyers could race to get themselves fixed assets ahead of the new limits on land.
And those of us who manage property should know these market trends too. Finding a middle ground by either postponing significant disposal periods until the market mood is more stable or providing a competitive offer during fluctuating times can reduce potential losses.
Amendments to the Foreign Investment Regime
Foreign direct investment (FDI) is a key driver of industrial property valuations, particularly in economies where the performance of the industrial base is reliant on global economic integration. Of course, foreign investment policies can and are dictated by government elections, the result of which will inevitably shape how enticing our industrial properties for sale across the nation are to potential overseas buyers.
The election of a government that is more favorable to foreign investment can create more demand for industrial property and therefore appreciation in value. On the other hand, policies that limit foreign investment might decrease the number of potential buyers, further driving down valuations.
Both of these scenarios will have to be dealt with by the industrial property management companies, and as such, there needs to be a strategy. If the policy environment for foreign investment becomes very restrictive, property managers may want to change their marketing and sell properties to domestic investors; likewise, when the policy environment is more welcoming for foreign investment, they may want to market to foreign buyers by emphasizing compliance with international standards.
The Impact of Monetary and Fiscal Policy on Property Finance
The government changes monetary and fiscal policies after the election, which of course determines how easily industrial properties can be bought with debt. The more affordable it is to borrow money with record low interest rates and with relaxed lending terms, the greater the possibility of purchase from industrial property investors, which boosts demand.
Taxation policies, including tax breaks for property development or capital influx in industrial regions, stimulate property values as well. Such policies enhance the financial appeal of industrial property, and this prompts industrial property management companies to command a higher price. On the other hand, policies that raise the cost of borrowing or restrict access to credit could dissuade prospective buyers, leading to lower industrial property values.
Preferred Metric Impacts of Monetary Policy on Industrial Property:
Increased borrowing: One of the results of lower interest rates is that Malaysian investors often start seeking loans to finance industrial properties for sale, elevating demand and thus increasing property value.
Rising Interest Rates: May increase the costs of financing to buy an industrial property and bring down property values
Demand for Industrial Properties from Regional Development Initiatives
Following elections, newly formed governments can implement regional development policies which may have a dramatic impact on industrial property demand in various parts of the nation. These efforts can range from the construction of industrial parks to incentives offered to businesses that set up shop in designated areas, as well as the enhancement of infrastructure in localities to support industrial development.
Announcement of these initiatives creates interest in all industrial properties, especially around the study area, thus increasing property values. In contrast, regions that are neglected by attention and investment may remain stable or lose demand.
Industry Impacts with regards to Property:
Stay on Top of Government Initiatives: Property managers can also keep an eye on what’s being developed in their region and factor any new developments into their investment and marketing strategies.
Zone property buying: If your property lies within a development zone or future growth boundary, then your return on investment could be huge when that area gains popularity with industrial tenants and investors.
Conclusion
The influence of government elections on industrial property value operates on multiple levels, including policy change, market reaction, foreign investment regimes, and regional development initiatives. Gaining insight into the potential impacts of these changes and making predictions about how this will affect the sector can give both industrial property management companies and prospective investors who plan to buy industrial properties for sale an edge over the competition.
Whether the elections had national importance, global implications, or just history in general, we had calm elections as an integral part of this business, carrying uncertainty and the ability for policies to change the game if you will, but letting uncertainty reign free is not a game you want to play, so answer the second question in saying that you have to be prepared to know how well your business, global and national (within country) not to mention politically, is performing. Nevertheless, with the fluidity of industrial property, preparation and flexibility will go a long way to establishing property value and capitalizing on market advancements.
