Singapore bank suspends loans for London properties after Brexit

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."

UOB has the biggest share of loans for the London property market among Singapore's three banks, an industry source said.

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.

But Donald Han, managing director of Chesterton Singapore, a consultancy specialising in UK property, said banks are just exercising caution given the uncertainties.

"London property prices are some of the most resilient in the world because even during the global financial crisis it only dipped by 10 to 15 percent," he told AFP.

"What's different this time is that Brexit is unprecedented. It's only the UK that's affected, not the rest of the world as was seen during the previous financial crisis so understandably the banks are being cautious."

Forex risks

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," said Tok Geok Peng, executive director of secured lending at DBS.

"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," Tok added.

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.