Singapore shophouse sales hit an all-time high of S$1.9b in 2021

This whopping transaction value exceeded that of 2019 and 2020 combined.

The total shophouse transaction value in Singapore reached a record S$1.9 billion in 2021. According to Knight Frank, while sales values in 2019 and 2020 hovered at a respectable S$915.9 million and S$912.7 million respectively, investors were more bullish in 2021 riding on the back of economic rebound. 

The total sales value in 2021 alone exceeded that of 2019 and 2020 put together (Exhibit 1). 

Here’s more from Knight Frank:

There were over a hundred transactions in each half of 2021, amounting to some 244 transactions in 2021. While this was lower than the most recent high of 291 transactions in 2012, the higher transacted values pushed overall sales value in 2021 to a record high, as more than half of the recorded shophouse deals in 2021 were above S$5 million. 

After a half-yearly high (since H1 2013) of 99 freehold transactions in H1 2021, another 95 were recorded in H2 2021. This brought freehold transaction volumes to 194 (51.6% y-o-y gain) grossing S$1.5 billion (84.1% y-o-y gain) in 2021, up from 128 for a total of S$789.6 million in 2020. Over 30% of freehold transactions in the year were in District 8, and more than 25% in District 14 and 15, as investor interest in the asset class moved out from the Downtown Core. 

Leasehold shophouses likewise saw a spike in transaction volume, from 17 in 2020 to 50 in 2021. Due to available leasehold inventory in the market and the allure of capital appreciation, about 60.0% of leasehold transactions were in the prime District 1 and 2. The Tanjong Pagar Conservation Area, for instance, recorded some 22 leasehold transactions at an average of S$8.8 million.

Unit prices of freehold shophouses averaged about S$4,414 psf on land in 2021, a 19.6% y-o-y increase. Unit prices of leasehold shophouses largely fluctuated depending on specific shophouses sold as there were fewer transactions, averaging S$5,100 psf on land in 2021. As majority of leasehold sales were in the prime Districts 1 and 2, average leasehold unit prices were about 15.5% higher than freehold sales, which were predominantly in Districts 8, 14 or 15. 

Gentrification is a key investment engine for heritage shophouses in modern Singapore. The popular and prime Districts 1 and 2 are largely gentrified areas commanding price premiums. Other areas such as Little India in District 8, while more affordable, are in the process of following on the gentrification journey, attracting investors with a long-term view of the eventual transformation of the district. At present, the gentrification process is still in its early stages in other districts such as Joo Chiat, but renewal can be expected sooner rather than later. 

Several bulk sales or en bloc deals materialised in 2021, contributing to the sales. The top deal in 2021 was the collective sale of three adjoining mixed-use redevelopment sites at Bukit Timah/Duke’s Road for S$53.9 million. Separately, the sale of Porcelain Hotel at the Kreta Ayer Conservation Area to RB Family Office was also completed for S$90.0 million over two land plots. 

A pair of shophouses at 202 and 204 South Bridge Road was sold in August for almost 10 times its initial price at S$35 million, after being held for more than 15 years by a Singapore-incorporated company owned by a Chinese citizen. In September, a shophouse at 14/A Stanley Street sold for 34.8% above the previous sale price after being held for less than a year.

Market outlook 

The year 2021 was exceptional for the shophouse market. Investor interest for shophouses as a defensive asset class soared during the pandemic, much like what was observed for residential properties. And the recent imposition of cooling measures could lead to some more spillover demand into the shophouse market, as commercially zoned shophouses remain unaffected by the latest government measures. 

Steady gentrification in shophouse districts will also continue to fuel demand, and it is expected that the total sales value for the shophouse market could reach S$2.0 billion in 2022. Especially so, with the moderate spillover effects from investors in the residential sector.