Singapore shophouses now investors’ newest “collector’s item”: Knight Frank

The total transaction value of S$836.1m in H1 2021 is already 91.6% of 2020’s totals.

According to Knight Frank, the total shophouse transaction value hit S$836.1 million in H1 2021, a 29.9% increase compared to H2 2020 as recovery momentum sustained on the back of a pickup in activity from Q4 2020. From a low of S$117.0 million in Q2 2020, total transaction values have since rebounded to S$365.4 and S$470.7 million in Q1 and Q2 2021 respectively. 

There were 118 transactions in H1 2021, exceeding the 90 in H2 2020 and the last recent  igh of 99 in H1 2018. While freehold shophouses (78.8%) still accounted for the bulk of transactions in H1 2021, leasehold sales volume more than doubled from H2 2020 to 25 units. Buyers who were drawn by hopes of capital appreciation showed interest in better-located leasehold shophouses, with over half of the leasehold transactions located at the prime District 2 (Anson, Tanjong Pagar).

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Reflecting initial signs of a shifting interest towards fringe area shophouses, District  8 (Little India) recorded the highest sales volume in H1 2021, accounting for over one- fifth (26) of shophouses transacted. A more affordable alternative for investors wanting  to venture into the increasingly popular shophouse scene, the shophouses in District 8 were snapped up at an average of S$4.2 million, with 18 out of the 26 sold at entry prices below S$5 million. Similarly in District 15, the average price was below S$4.5 million.

Shophouses in the traditionally favoured areas nevertheless remained sought-after. District 1 (Raffles Place, Cecil, Marina, People’s Park) and 2 recorded 15 and 20  transactions respectively. Many of the shophouses sold featured main street frontages and operated as F&B businesses such as in Tras Street, and sold at S$11.5 million on average.

While unit prices of freehold shophouses dipped a marginal 0.4% from H2 2020 to average S$4,344 psf on land in H1 2021, this was however a 59.5% jump compared to the same period last year when Singapore was grappling with the onset of COVID-19. Average leasehold prices increased by 4.9% to S$4,418 psf on land when compared to H2 2020 and 23.0% against H1 2020, due to transactions  in the Tanjong Pagar and Kreta Ayer Conservation Areas fetching higher prices.

About 56.8% of the shophouses sold in the first half of 2021 were above S$5 million, a higher proportion against the 42.2% in H2 2020. The top five deals by price quantum were in Districts 1 and 2, where top price premiums need to be offered to prise these assets from sellers. 

A fully tenanted three-storey conservation shophouse with an attic at 91 Tanjong Pagar Road transacted at more than five times the previous sale price after being held for about 15 years. Separately, another shophouse at 13 Ann Siang Road was sold at S$9.3 million, 9.2% above the previous sale price after being held for less than a year. 

Outlook

Buyers exhibited a continued appetite for shophouse assets in the first half of 2021. Year 2020 might have been characterised by the pandemic and recession, but this does not diminish the fact that in just the first six months of 2021, the total transaction value was already 91.6% of the full year 2020 while the number of units transacted accounted for 81.4% of last year’s total. So barring any recurring waves of the COVID-19 infection and based on the current demand momentum, it is more than possible for the sales value in the full year of 2021 to exceed the last S$1.46 billion high posted in 2018, and for sales  volume to cross the 200 unit mark.

In addition, with many still keen to test the market on the offers they can draw, we might see shophouse sales in the second half of the year achieving new benchmark prices. While buyers will continue to seek to acquire a collector’s item to own or operate from, there is an inevitable ceiling to escalating prices where the buyers will start to show resistance.