A comprehensive look at what’s trending in the world of commercial real estate
There is a lot of fear in the market about potential tax increases coming thisyear under the new Biden administrationand a Congress controlled by Democrats.
But Richard Barkham, global chiefeconomist and head of Americas Researchat CBRE, doesn’t see this as an immediatethreat.
“I certainly think that it would beunlikely that we would see those taxincreases in 2021 because, although we’reoptimistic about the economy, until thisvirus is defeated, it is still very much touchand go,” Barkham said on CBRE’s “TheWeekly Take” podcast.
Barkham thinks the Democratic majority will allow Joe Biden to get elements ofhis legislative program through, includinganother stimulus that will provide a second boost to the economy. In the meantime, the $900 billion second stimulus,which is 4% of GDP, coming into the USeconomy will provide a shot in the armearly in the year, according to Barkham.
“It’s the second biggest stimulus in history, and that’s coming in Q1,” Barkhamsays.
Also, the vaccine rollout, which willprovide a literal shot in the arm, shouldalso offer an economic boost. “It may takeus longer than the six months that weoriginally thought, but it’s going to be inplace largely by mid to late 2021, and thatmeans a revival in economic activity,”Barkham says.
Peter Linneman, principal and
founder, Linneman Associates, thinks that
Democrats will prioritize impeachment,
social justice legislation, and environmen-
tal legislation. Tax legislation should fall
behind these other priorities. “It won’t get
radically redone,” he said on “The Weekly
Take” podcast. “And I think the upper tax
bracket gets tweaked, [and] the rest not
Eventually, Barkham thinks some tax
increases will be coming for the wealthier
families in America. But he sees those tax
initiatives coming later, probably in 2022. By
then, the midterms will be on the horizon,
which might dissuade politicians from rais-
ing taxes. But even if there are moderate tax
increases, he thinks it is unlikely to derail
economic growth in the United States.
With all of the stimulus money beingpumped into the economy, inflation is aconcern. Barkham could see inflationincreasing 2% and 3%. But he doesn’texpect inflationary rates of 7%, 8% or 9%.“I do see inflation trending up from thispoint onwards, but not to dangerous levels,” Barkham says.
In fact, Barkham thinks the inflationthat may hit the market could be usefulfor running the economy. In real estate,the 10-Year Treasury is used to priceprime property or high-grade property.Barkham doesn’t think investors will seeany real issues this year, though. “If anything, it’s an issue for 2022, 2023, but it isone that we will keep under review,”Barkham says.
While the political atmosphere hasbecome very toxic in the US, Barkhamthinks it will have little effect on theeconomy. “My general feeling is thatprobably politics is not really that material for the macroeconomy or for realestate when all of the debate and noisedies down,” he says.
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