A top Singapore bank said today it has suspended loans to anyone wanting to buy property in London, citing uncertainty from Britain’s vote to quit the EU but dealing a blow to investors looking to make the most of the weak pound.
United Overseas Bank (UOB), one of the city-state’s three homegrown lenders, said it was monitoring the market closely to determine when the loans would resume.
“We will temporarily stop receiving foreign property loan applications for London properties,” it said in a statement.
“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,” it added.
“We are monitoring the market environment closely and will assess regularly to determine when we will re-instate our London property loan offering.”
Financial markets were plunged into turmoil following last week’s Brexit vote and while they have enjoyed a recovery over the past few days, analysts warn there could be repercussions well beyond Britain and Europe.
Market-watchers said property prices in Britain are expected to plummet as the pound takes a beating, and foreign investors, especially those from Asia, are already poised for a buying spree.
The pound tumbled more than 10 percent against the US dollar Friday to a 31-year low, and while it has recovered slightly it is still under pressure.
Singapore’s biggest bank DBS said it would continue to provide financing for property purchases in London but gave customers the option of borrowing in Singapore dollars or pounds.
“For customers interested in buying properties in London, we would advise them to assess the situation carefully before committing to their purchases as there could be potential foreign exchange and sovereign risks,” DBS said in a statement.
“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). This is in addition to the risks associated with any government policy changes.”
Asian investors have long sought out both commercial and residential UK property off the back of potential for capital growth and a resilient economy.
London house prices are some of the most expensive in the world and have been on the rise over the past six years.
But international consultancy KPMG has forecast house prices could fall five percent nationwide – and even more in the capital – following Friday’s surprise decision to separate from the EU after four decades.
Another consultancy, Jones Lang LaSalle, said prices could fall 10 per cent over the next two years.