President Donald Trump’s executive order temporarily banning travelers from seven Muslim-majority countries has raised concern among foreign investors in U.S. property, with some anxious about what the new rules mean for them.
Mr. Trump’s executive order, signed on Friday, temporarily bans citizens of Sudan, Somalia, Libya, Syria, Iran, Iraq and Yemen, including those with dual citizenship (not including the U.S.), from entering the country. The order has created chaos at airports around the world, where people with valid visas to visit, study and live in the United States are being prevented from boarding flights. More than 100 travelers were detained at U.S. airports over the weekend.
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Brokers say the travel ban has sown mixed reaction among real estate investors from the Middle East and North Africa, with some looking to sell off their U.S. homes and invest in cities elsewhere, while others, particularly ultra-wealthy investors, are forging ahead with deals despite the new rules.
Over the last three days, Rokstone, a luxury real estate brokerage in London, saw a 40% spike in inquiries from Middle Eastern and Asian buyers as a result of the changes to the U.S. immigration and visa rules, said Becky Fatemi, managing director. About 60% of Rokstone’s clientele come from outside of the U.K., including Iran, the United Arab Emirates and Qatar.
"Our clients will without doubt now be more inclined to purchase property in London or Dubai, and spend more of their leisure time and shopping in the UK capital or in the Dubai Mall, rather than face visa hassles or border issues in the United States," Ms. Fatemi said.
Not every broker is registering the same concern from clients, however.
New York City luxury broker Dolly Lenz said she touched base with her foreign clients after Friday’s executive order. She found that all, including those from banned countries, plan to go through with their transactions.
"Either they don’t know or they don’t care," said Ms. Lenz, adding that their indifference may be due to their ultra-high net worth status.
Based on this experience, Ms. Lenz expects extremely wealthy investors from the Middle East to continue to invest in New York despite the ban. "Any push back would come at the beginning of the program. It looks like business as usual," she said.
That’s not the experience for buyers in Los Angeles, which has earned the nickname "Tehrangeles" for having a large Iranian community, estimated at 300,000 to 500,000 people. The thriving community has continued to attract property investment from Iranian nationals looking for safe havens and who tend to buy in tony areas like Bel Air, Beverly Hills and Brentwood, said Freida Sanei, a broker with Berkshire Hathaway and an Iranian-American.
Since Friday, several of her clients have discussed selling their Los Angeles properties and investing elsewhere, Ms. Sanei said.
"A couple of my clients are thinking of selling their properties and going to Canada or going back to Iran," Ms. Sanei said. Another of her clients is Syrian and will likely stay put despite the uncertainty because living in war-torn Syria is hardly possible.
"They’ve got no options," she said. "It has thrown a wrench in the lives of many innocent people."
The travel ban blindsided Iranian-Americans in her community, some of whom voted for Mr. Trump, Ms. Sanei added. "They feel the country is becoming more like Iran after the revolution, when presidents came in and changed everything," she said.
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Over the summer, property consultancy Cluttons conducted a survey of high-net-worth individuals from the Gulf States, such as Saudi Arabia and the United Arab Emirates, and asked where they expected to invest in property in 2016 and 2017.
While New York and Los Angeles both made it to the top 10 for 2016, no U.S. city made the list when asked about 2017, said Faisal Durrani, head of research at the agency.
"We concluded that it was probably people being a little bit nervous about (Mr. Trump) winning and any repercussions," Mr. Durrani said.
In the survey, Toronto leapt near the top of the list for 2017, a sign that the Canadian city may become a proxy replacing investment in the U.S. during the Trump administration, he added.
Ms. Fatemi, the London broker, noted that buyers from Mr. Trump’s no-entry list, particularly Iran, have historically faced higher investment regulation and visa requirements under previous administrations, too. But the suddenness of Mr. Trump’s order may have unintended consequences.
"Even if nationals from Syria, Iran and Iraq are banned, it eventually makes visitors from places like Saudi Arabia, the UAE and Qatar wonder if they will also have difficulties visiting the United States," she said. While Mr. Trump’s policies may be well-intentioned, she said, "it could all end up backfiring and causing needless upset and damage to the American economy."
Middle Eastern investors spend between $6 billion-to-$7 billion each year in New York City, alone, Ms. Fatemi pointed out: "This is a lot of potential investment to put at risk."