Banks target newly wealthy Asian buyers with short-term loans

November 12, 2012 02:00PM

As Asia’s newly wealthy are increasingly interested in Western investment properties, the wealth management divisions of banks have begun to accommodate them by offering more short-term revolving loans, according to the New York Times. Typically, these loans have a five-year term and are renewable annually after that, with an individually set interest rate according to the borrower’s credit profile.

The shorter time frame allows these buyers greater flexibility with their funds. “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,” Michelle Tan, head of real estate product management at Bank of Singapore, told the Times.

One survey by the real estate agency Cluttons and the consulting firm VPC Asia Pacific showed that London’s residential market was the preferred target of Asia’s wealthy investors.

“In today’s low interest rate environment, many Asian-based investors still see U.K. property as a good investment opportunity,” said Bryan Henning, head of global research and investments for Asia at the wealth and investment management division of Barclays.

But just behind London, New York has remained an extremely popular investment market.

However, the banks lending to this class of investor are still avoiding funding new developments, only writing loans for completed prime properties in order to minimize risk. [NYT]Christopher Cameron