Singapore bank suspends London property mortgages

A loan programme aimed at Asian purchasers of properties in London has been suspended by leading Singapore bank UOB in the wake of the Brexit vote in the UK referendum.

London prime property
In a statement, the bank said, "We will temporarily stop receiving foreign property loan applications for London properties. As the aftermath of the UK referendum is still unfolding and given the uncertainties, we need to ensure our customers are cautious with their London property investments."The fall in the value of the pound since the referendum outcome was known has resulted in a surge of increase in London property among foreign buyers, according to the National Association of Estate Agents.Singapore's biggest lender, DBS, is continuing to provide financing, but is advising its customers to be cautious. "For customers interested in buying properties in London, we would advise them to assess the situation carefully," Tok Geok Peng, DBS executive director of secured lending, told the BBC."With foreign exchange risks, even if the value of the overseas property rises, any gains will be eroded if the country's currency depreciates against the Singapore dollar."The Singapore dollar has gained about 10 per cent against sterling since the referendum and, according to Knight Frank, Singaporeans were the top Asian buyers of UK commercial property last year.Karishma Vaswani, the BBC's Asia business correspondent, commented, "Read this as the bank telling Singapore borrowers: 'Hold your horses, chaps – you may be in for a bumpy ride'."Market sources tell me that UOB has the highest exposure amongst the big three banks in Singapore to London property loans. UOB doesn't disclose how much it lends out for the London portfolio but it also offers international loans for Australia and Thailand."In a report looking at the effects of Brexit on the international property market, particularly in Asia, JLL – a global professional services and investment management firm,  offering specialist real estate services – said the vote would inevitably create uncertainty over real estate."For property markets, the initial correction may be most severe but should be followed by an upturn as opportunities re-emerge in UK core markets and benefits of weak sterling are recognised. Sentiment and relative pricing will be key. Much will depend on the speed of negotiation, the wider political picture and whether a clear direction of travel and timetable for an EU exit is established early on," the report said."Any immediate impact from Brexit on Asia Pacific real estate markets will be from foreign buyers who are unable to bid until volatility passes and banks that have strong connections to Europe who are unable to price risk in current volatile markets."It is possible that real estate investment deal flow may slow, whilst this period of financial volatility continues. However, there will be winners. The weight of capital in Asia Pacific is such that alternative capital sources inside Asia will be able to take advantage of the opportunities presented. Some currencies will strengthen – notably the JPY – increasing purchasing power." 

Read analysis of what the vote to leave the EU may mean for for the global mobility industry in Brexit is a reality – a new era for global mobility? by Relocate Global's managing editor, Fiona Murchie.

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