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Shophouses in Singapore have long been popular with both local and international investors due to various reasons, including strong heritage value, potential for capital appreciation and healthy rental demand from F&B and retail operators, among others. Here are some considerations one should be aware of before making a purchase.
1) Is it a conservation shophouse?
There are several thousands of shophouses in Singapore, of which only about 6,500 of them are conserved. It is important to check whether the one you are planning to purchase is under conservation as these are more valuable, and if so, there are conservation guidelines that owners will have to adhere to when carrying out restoration and renovation works.
For example, for shophouses located within the historic districts of Boat Quay, Chinatown, Kampong Glam and Little India, the entire building has to be retained and restored, whereas for shophouses situated within the residential historic districts, including Blair Plain, Cairnhill and Emerald Hill, the rules are less stringent and owners may make slight modifications to their shophouse, such as building a new rear extension that has to be lower than the main roof.
2) Zoning and potential uses
Whether you are planning to purchase a shophouse for residential living or for investment, one of the first things you have to do is to find out if you are allowed to use your shophouse of choice for its intended purpose, as shophouses are officially zoned for different uses depending on their location. Some shophouses are zoned residential, with shop units on the first floor and residential units on the upper floors, while there are others that are zoned commercial.
For shophouses that are zoned residential, the residential units on the upper floors are not allowed to be used for non-residential purposes, whereas for shophouses that are zoned commercial, owners can apply for permission from the authorities to change the residential portion of the shophouse to compatible commercial uses, such as offices and shops.
3) Unlock value in shophouses that have not fully utilised their allowable GFAs
For shophouses that have not fully utilised their allowable GFAs, owners have the option of building extensions with or without paying additional land premiums, to be reviewed on a case-by-case basis, thereby increasing the value of the shophouses.
For example, for shophouses at Balestier, the allowable number of storeys for new extensions is up to six storeys, while shophouses at River Valley are permitted to build up to 10 storeys. This is especially important for investors to note as they can reconfigure the internal space and put in more tenants to achieve higher rental yields.
4) A row of adjacent shophouses is rare, and those with flexible configurations can command higher prices
Investors should review the layout plans to ensure that the party walls can be knocked down to create access between the shophouses across each floor, such that the entire space can be tenanted to one tenant. On the other hand, while some adjacent shophouses share one stairway access, others have independent stairways such that the shophouses can be tenanted to multiple tenants without the need to provide easements and compromising the privacy of tenants.
5) Refurbishment history and structural integrity of the shophouses
It is important to check when a full renovation was last completed as conservation shophouses are old – some were built as far back as the early 1900s, and some may have been left vacant for several years. As such, some parts of the shophouse, such as the party walls, roof or stairway, may require repairs for safety purposes. Buyers and investors can either commission a structural engineer to inspect the property, or request for the latest mandatory BCA visual inspection report, submitted by the owner every five years for the target shophouse.
Furthermore, as most of the conservation shophouses comprise timber joists and floorboards, one should also inspect for termite infestation. Professional consultants can provide an estimated cost to rectify such defects, if any, which can then be taken into consideration as part of the investment.
6) The “3 Rs”: Retention, sensitive restoration and careful repair
The three fundamental principles that are applicable to all conserved buildings in Singapore are maximum retention, sensitive restoration and careful repair. Before commencing on any conservation work, it is important for architects and designers to do extensive research on the original design of the shophouse, such as referring to archival drawings and pictorial records, as well as conducting a detailed site examination to fully understand the condition of the original structure.
Another important rule to follow when restoring a conserved shophouse is to retain its traditional façade, which can identify the period in which the shophouse was built. All other original structural and architectural elements are also required to be retained and restored as far as possible. However, if the original parts are severely damaged and need to be repaired or replaced, restoration is to be done in an unobtrusive way, using original methods and materials wherever possible.
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