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While the shophouse market is expected to go through a challenging period this year, Knight Frank believes that there will “always be investors on the lookout for opportunities from this limited and scarce property asset class”.
Singapore saw total shophouse transaction values drop 47.1% to $253.2 million during the first half of 2020 as the COVID-19 pandemic dampened sentiments and constrained economic activity, revealed a Knight Frank report.
In 1H 2020, average unit prices of freehold shophouses fell 32.7% on a half-yearly basis to $2,692 per sq ft (psf) on land, while prices of leasehold shophouses declined 30.2% year-on-year to $3,591 psf on land.
“With the moderation in prices, savvy investors purchased these shophouses as a safe-haven for their investments,” noted the report.
Shophouse transactions during the period under review fell to 52 from the 65 lodged in 2H 2019. This comes as transaction volume in Q2 2020 “fell below normal levels amid the circuit breaker with 20 recorded shophouse sales”.
Despite business and human restrictions, there was still evidence of market activity, with shophouses outside popular conservation areas supporting total sales volumes. For instance, four shophouses at Sims Avenue in Geylang were transacted in April at $2.8 million each.
Knight Frank noted that the first half of the year was a tale of two quarters, with shophouse trends during the first and second quarters differing in price quantum and location.
Transactions in Q1 2020 were for those in the more popular conservation areas like Little India, Tanjong Pagar, Desker Road and Kampong Glam, “with almost half of the transactions priced at $4 million and above”.
“On the other hand in Q2 2020, 85% of the transactions lodged were between $1 and $4 million as investors targeted these shophouses as safe bets, hedging against the looming economic uncertainty caused by the pandemic.” Transactions for this quarter included the shophouses at 120/A/B and 118/A/B Pasir Panjang Road, which were sold for $3 million each.
There were also some big-ticket transactions in 1H 2020, with the top deal being the $39 million bulk sale of 10 shophouses within Teck Chye Terrace.
The report revealed that a few of the shophouse transactions in 1H 2020 enjoyed high returns. The shophouse at 41 Duxton Road, for instance, was sold for $4.9 million or more than six times than its $800,000 price in 2003.
While Singapore’s shophouse market is expected to go through a challenging period this year, Knight Frank believes that there will “always be investors on the lookout for opportunities from this limited and scarce property asset class”.
“Once the spectre of COVID-19 has abated, demand volume is expected to return among investors of shophouses as a means of wealth preservation, stable recurring income and the prospect of substantial capital appreciation over time,” it said.
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Victor Kang, Digital Content Specialist at PropertyGuru, edited this story. To contact him about this or other stories, email victorkang@propertyguru.com.sg