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Shophouse sales in Singapore soared 281 percent on an annual basis to a five-year high of $478.6 million in Q1 2018 thanks to strong demand from property funds, investment companies and super wealthy individuals, reported Singapore Business Review.
Notable deals during the quarter included the sale of 273 and 275 South Bridge Road for $26.5 million and 8M Real Estate’s acquisition of 10 shophouses in District 1 close to the Singapore River for a total of $82.5 million.
“Prime shophouses are seldom put on the market and this contributed to an increase in sales volume,” said Clemence Lee, JLL Singapore’s capital markets associate director.
He shared that some of the deals they brokered contributed to the record sales volume. For instance, the property agency was appointed by Lee Brothers (Wee Kee) to find buyers for 15 shophouses, of which 10 were taken up in the first quarter.
Lee added that they are beginning to see more interest from family offices and local high net worth individuals (HNWIs) towards buying conservation shophouses.
“Each shophouse is unique and has strong heritage significance. Owning shophouses is akin to owning an art piece. Due to its scarcity and historical value, shophouses are seen as trophy assets and are an asset class which is defensive and offers stability during economic uncertainty,” he said.
Moreover, Colliers International noted that shophouses have long been coveted properties given their prime locations, scarcity and historical charm.
“Other factors that contributed to the popularity of shophouses as an investment include foreigners are eligible (to buy) compared to landed properties, Additional Buyer’s Stamp Duty and Seller’s Stamp Duty are not applicable, and the absence of restrictions on financing compared to residential properties,” said Steven Tan, Colliers’ International director of capital markets & investment services.
There are currently about 6,500 to 7,000 conserved shophouses here, based on data from the Urban Redevelopment Authority.
“Built between the early-1800s and mid1900s, many of these shophouses are located in Central Singapore, in heritage districts of Kampong Glam, Chinatown and Little India, as well as along the Singapore River,” said Tan.
While shophouse buyers need to follow conservation rules, prices of such properties are anticipated to continue rising, said Lee, adding that they generally offer higher yields compared to residential units.
However, Colliers International research head Tricia Song noted that gross rental yields of freehold and 999-year leasehold shophouses have dipped in recent years and now average about 2.5 percent to 2.7 percent.
“Over the long-term, we think prices of shophouses tend to be more resilient and are somewhat more immune to the volatility of the market due to their limited supply and historical value,” she added.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
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