One of Singapore’s largest lenders, UOB, says it has suspended its loan programme for London properties.
The decision comes in response to uncertainty caused by the UK’s decision to leave the EU, the bank said.
The vote on 23 June caused global market turmoil and pushed the pound to 31-year lows. The Singapore dollar has gained about 10% since the referendum.
Singaporeans were the top Asian buyers of UK commercial property in 2015,according to consultancy Knight Frank.
UOB told the BBC in a statement: “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.”
Analysis: Karishma Vaswani, Asia Business correspondent
Asian banks are taking a hard look at the political and economic uncertainty in the UK – and some of them don’t like what they see.
Singapore’s UOB has taken urgent action: it is temporarily suspending its loans programme for London properties as a result of what it called uncertainties post the UK referendum. It is the first of the big three Singapore banks to do this.
UOB had other options – it could have raised borrowing rates on the loans, or ask for bigger deposits – or even decided to review the loans rather than suspend them all together. But it’s a sign of just how concerned some Asian banks may be about the current situation in the UK.
Meanwhile DBS, Singapore’s and South East Asia’s largest lender, and OCBC have decided to stay in the game for now. They say they’re monitoring the situation closely – telling their customers to be aware of the foreign exchange and government policy risks.
Read this as these banks telling Singapore borrowers – hold your horses chaps, you may be in for a bumpy ride.
‘Tip of the iceberg’?
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 2015, Singapore was the top investor amongst Asian investors in UK, US and Australian commercial property, according to consultancy Knight Frank. Residential data is much harder to determine, according to the consultancy, but certainly since 2009 Singaporean investors have been significant buyers in many overseas markets, including London residential projects.
Meanwhile, banking analysts say it’s not surprising that some Asian banks are looking to reduce their exposure to the UK.
“From a banking perspective, this [the possibility of Brexit] is just the tip of the iceberg,” Sam Ahmed, Managing Director of Deriv Asia told me. “And banks will look to protect themselves from unintended consequences and adopt a more conservative approach by limiting their exposure for UK based assets.”
That’s despite the depreciation in the pound, which is trading at around $1.34 – a fall of about 10% from pre-UK referendum highs which is likely to make it more appealing for Asian investors wanting to buy properties in London – many of whom are likely to apply for loans from British banks instead.
That may be just as well – because as Mr Ahmed tells me, “it may be very difficult to approach an Asian bank to get financing for a UK asset in the current environment”.
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,” DBS executive director of secured lending, Tok Geok Peng, 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,” Mr Tok explained.
Singapore’s other big lender, OCBC bank, told the BBC it had not made any changes to its advisory policy.
Head of consumer secured lending Phang Lah Hwa told the BBC that OCBC was still making financing available for London properties and was “monitoring the situation closely”.