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The value of shophouse deals increased to $173.2 million – from $117 million in Q2 2020 and $152 million in Q1 2020, according to Savills.
Singapore’s shophouse market stirred back to life in the third quarter of 2020, with the value of shophouse deals increasing to $173.2 million – from $117 million in the previous quarter and $152 million in Q1 2020, reported The Business Times (BT) citing Savills Singapore’s analysis of caveats data in URA Realis.
Although the figures for Q1 and Q2 were lower by 31% and 46% from their respective periods last year, the value of shophouses transacted in the third quarter was almost similar to that of Q3 2019.
For the first nine months of 2020, shophouse transaction value fell 28% to $442.2 million from $611.6 million over the same period last year.
Yap Hui Yee, Director of Investment sales at Savills Singapore, noted that buying interest for shophouses proved to be quite stable pre- and post-circuit breaker. “In a strong liquidity and low interest rate environment, there has also been more attention on shophouses due to their rarity and strong preservation of capital value,” she said as quoted by BT.
Aside from the higher yields, analysts noted that some investors prefer commercial shophouses over residential properties since there is no Additional Buyer’s Stamp Duty involved; neither is there any stamp duty payable when exiting the investment.
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BT revealed that the investors’ pool for shophouses includes foreign buyers facing restrictions in acquiring landed homes. These group of buyers are allowed to purchase shophouses located on sites that are zoned for commercial use.
Among the foreign buyers who have been viewing shophouses lately are Chinese individuals in their late 20s or early 30s as well as citizens from tax havens such as Dominica and Vanuatu, said a veteran shophouse agent.
Yap shared that Singapore shophouses are generally held by private equity funds, families with strong holding power and high-net worth individuals.
Clemence Lee, Senior Director of Capital Markets at CBRE, said shophouse sellers these days are categorised into two groups – the first being those who are looking to sell even before the pandemic, some of whom have pulled their properties off the market since they do not expect to achieve a high price during this period.
The second group are those who may have the need to cash out since their business have been affected by the pandemic.
“This group will typically be willing to provide discounts of 5 to 10%,” said Lee as quoted by BT.
However, not all those who wish to exit are in financial distress, said an industry observer, adding that some may have other plans and are willing to let go of their properties at below their initial asking price.
In fact, an active shophouse investor noted that asking prices are now “a bit more realistic than before, but at the same time, supported by lower interest cost”.
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