Singaporeans are the most prolific speculators on UK commercial property, and the United Overseas Bank is the most prolific lender to Singaporeans who want to speculate in that market — and now they’re turning off the faucet.
40% of the UK’s national wealth is in the form of property in the southeast, much of it anonymously owned by overseas speculators. The UK government has been very resistant to requiring disclosure of the beneficial owners of UK property — refusing to contemplate any transparency requirements for trusts, which are the primary vehicle for money laundering in the UK — which has allowed overseas criminals of all description to illegally move money out of their own countries and convert it to easily liquidated property in the white-hot UK market. This had the effect of pricing many Britons out of the housing market, while increasing political pressure to eliminate protection for tenants to increase the value of these properties.
Property speculation’s distortions to the lives of Britons can’t really be overstated. Shelter is second only to food in Maslow’s hierarchy of needs, after all. As the UK economy has become increasingly dependent on the creation of safe-deposit boxes in the sky for offshore oligarchs, national policy has been warped around the pretense that this is somehow useful or good. Nevermind that it would be illegal for Britons to buy property in the home countries of these speculators, and that the speculators themselves are breaking their national laws by buying in the UK, or that half the bedrooms in the southeast will be empty on any given night…
The Brexit vote has tanked the pound and spooked the speculators. It’s unlikely that a Brexited Britain would continue to be the center of the Euro-denominated derivatives market, and major finance institutions are already relocating their employees in anticipation of the EU caning the UK to scare other potential separatists away from their own referenda. A crash in southeastern property prices is long, long overdue, and has been put off for so long that it will be truly cataclysmic when it arrives. The Office for Budget Responsibility predicted that 10,000,000 mortgages would go underwater if interest rates went up to 5%, and many pensions and annuities are invested in the property market (nevermind the millions of Britons whose “pension” is a bet that they can flog their house in 40 years for enough to retire on, somewhere else) (though not somewhere in the EU, I guess).
Even if the property market remains buoyant, the crashing pound means fewer returns for foreign investors. If you’re speculating with Singapore Dollars in the UK property market, the falling pound means that your “investment” is deflating even if the price stays the same.
“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.”
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.
Brexit: Singapore bank UOB suspends London property loans
[BBC]
(Image: But is it Art?, Nigel Mykura, CC-BY-SA)