Singapore shophouse sales hit S$938.8m in H1

Demand shows no signs of slowing down anytime soon.

According to a recent Knight Frank report, the sale of 114 shophouse units in the first six months of the year amounted to a total of S$938.8 million. This is comparable to the sales performances in the two halves of 2021 where deals totalled S$919.0 million (131 units) and S$1,019.6 million (123 units) in H1 and H2 2021 respectively. 

The shophouse market retained its popularity in H1 2022, after the record-breaking total value in 2021 (Exhibit 1). Given that conserved shophouses in Singapore are limited in stock, the demand for this asset class is unlikely to fade any time soon. 

Here’s more from Knight Frank:

Despite the transaction volume of 114 units in H1 2022 being slightly lower than the six-monthly periods of H1 and H2 2021, this was nonetheless higher than the total number of units sold half-yearly from H2 2013 to H2 2020, which averaged 64 units. About 79.8%, or 91 units, were freehold shophouses, with a total of S$711.5 million and an average price of S$4,982 psf on land. 

Demand for leasehold shophouses also did not slow down as 23 units were sold in H1 2022, although this total value of S$227.3 million was marginally less than the S$242.2 million in H2 2021, with the corresponding average price at S$5,185 psf on land. 

Shophouses in the Rochor Planning Area came out on top as 53 units were sold, marking two consecutive halves where shophouses within this area transacted at volumes above pre-covid levels. Out of the 53 units sold at a total of S$357.8 million, a caveat was lodged for a freehold corner shophouse at 17, 17A and 17B Jalan Klapa for S$12.2 million, representing a super-normal increase of some 823% from the previous transaction more than a decade ago. Despite this top line sale, the Rochor Planning Area (which includes the Little India Conservation Area) tends to attract investors on the lookout for shophouse space priced at more palatable price quantums of below S$10 million.

In the east, sales activity in District 15 dwindled in the first six months of the year after healthy growth over the last two years, with only five units sold in H1 2022. Given the cultural heritage of the area with the potential for increasing gentrification, existing shophouse owners could be holding on to their units in expectation of further interest from investors that would likely result in capital gain.

Similarly, the transactions of just 10 units in Districts 1 and 2 seemed to suggest hawkish sales activity. But as long as buyers are willing to pay a premium for such shophouse units, recognising its scarce supply, those situated in these areas should continue to attract demand. 

The sale of Hotel Clover where a row of shophouses exchanged hands for S$74.8 million in March 2022 was the largest deal in H1 2022. In view of the Vaccinated Travel Framework, allowing travellers to enter Singapore without quarantine, air travel will increase in the remainder of the year, bringing respite for hoteliers and retailers who have borne the brunt of the pandemic over the last two years. 

Therefore, the upbeat sales performance for shophouses is likely to continue, as it has been a mere three months since tourist inflow picked up pace.

Market outlook

As pre-pandemic normalcy returns with increased air travel, the shophouse market could potentially see another wave of demand stemming from investors who were previously restricted by travel measures and are interested in owning a shophouse in enclaves with ongoing gentrification. This might also include family offices from around the region. 

Additionally, as commercial properties are not subject to the Additional Buyer’s Stamp Duty (ABSD) and Seller’s Stamp Duty (SSD), shophouses are expected to remain on investors’ radar for the remainder of the year. 

Despite being vulnerable to external headwinds, Singapore offers a safe and low-risk environment for investors who may be looking to shelter against economic uncertainties. Therefore, given the sustained momentum in H1 2022, coupled with the limited supply, the shophouse market could record just under S$2.0 billion of sales for the whole of 2022.