subject: Banks See Opportunity In Asians Buying Properties Abroad [print this page] Recently, there is a steady increase in the number of rich Asians buying properties abroad either for residence or for investment purposes. Bankers see this as a great opportunity for their business and they go out of their way to extend whatever assistance these prospective buyers need to acquire the properties they want.
For this purpose, the wealth management departments of banks establish revolving loans for wealthy Asian clients who want to purchase properties. These terms are usually on a short-term basis, five years being the average duration. Borrowers can renew their loans after the five-year term. The credit profile of the borrower serves as the basis for the loans interest rate.
According to Michelle Tan, Bank of Singapores real estate product management head, Many wealthy people may want to maintain their liquidity rather than just applying it to the real estate assets, as liquidity allows them to take advantage of investment or business opportunities that may arise.
Clients can take advantage of the lower interest rates by borrowing money against property and then use the funds on investments that will generate more money. Another way to take advantage of low interest rates is to borrow money not in U.S. dollars or British pounds, but in Asian currencies, which have increased in value recently against certain Western currencies.
According to a survey released by consulting firm VPC Asia Pacific and real estate firm Cluttons, the play on currencies is essential considering that London is named as the top target market by almost 60 percent of investors when it comes to property purchases. Wealthy investors from Singapore, Kuala Lumpur, Bangkok, and Indonesia have included London among their primary markets for investments abroad. Even if the commercial real estate in Asia is in stable condition, these wealthy clients prefer to expand their investments in foreign properties.
For the past couple of years, there has been strong demand for home purchase loans for London properties, especially since the property market in the country has weakened due to the recent global financial crisis. Investors are aware of the returns they could gain by renting their purchased properties in the future, not to mention the possible capital appreciation.
According to Bryan Henning of Barclays wealth and investment management division, In todays low interest rate environment, many Asian-based investors still see U.K. property as a good investment opportunity.
He added that This demand has been further supported where the home currencies of some of our client base has appreciated against sterling, such as in Singapore, where the Singapore dollar has appreciated by 20 percent over the past three years.
Aside from London, there is also a steady increase in investments made in properties located in New York and Australia. Clients are interested in buying houses for their children who may opt to study abroad. There are also clients who buy properties that can be possible retirement havens.
Family and educational ties are additional motivational factors for those Asian clients who want to buy property abroad. Camilla Dell, who works as managing partner for independent buying agency Black Brick Property Solutions, said that Asian buyers like to educate their children in the U.K. and will often buy a property rather than rent. Her Asian client base has grown tremendously for the past couple of years.
Property is viewed as a safe haven, and the weakness in sterling against Asian currencies is also a key driver, she added.
Even in these conditions, wealth managers issue loans for completed properties only. They recognize that the risks involved in issuing loans for properties that are not yet completed are too high. Banks prefer to approve loans for completed properties that are located on areas that have reliable rental income.
