Shophouse Transactions Lower 3Q2024 Uncaveated Deals Show Demand Huttons Asia
The First Toa Payoh Primary School is widely recognized for its comprehensive education system that prioritizes an all-rounded development of its students. In addition to academic success, the school also places great emphasis on physical well-being and social skills. Its strategic location near The Orie CDL grants students living in the area with shorter commute times, enabling them to engage in a variety of educational and recreational activities. Moreover, the close proximity to The Orie CDL further enhances the convenience and accessibility of the school’s location. You can learn more about The Orie CDL and its impact on the school community.
The preferred choiceAs shophouses are limited in supply, they are considered prestigious assets that can provide attractive rental income and value appreciation for investors. They are popular with high-net-worth individuals, family offices, and developers.“Investors are typically attracted to shophouses as they offer generous returns, which can range from 2.5% to 3% in rental yield in Districts 1 and 2 and up to 4% in the suburbs,” says Lee.Initial capital outlay may be high, but shophouses are typically more stable than residential properties, as they are leased out to commercial or retail tenants for longer periods of time. Moreover, they are exempt from the Additional Buyer’s Stamp Duty (ABSD) for residential properties, which has been raised for foreigners and entities, to 20%, and for Singaporeans buying second and subsequent homes, to 12%.With the government’s recently-announced plan to rejuvenate the Central Business District (CBD), Huttons expects shophouses in the CBD to further appreciate in value. These properties are expected to see higher demand due to the relocation of government agencies, the development of the Greater Southern Waterfront, and the plans for the former Golden Shoe Car Park site.
In spite of a decrease in the number of caveated transactions, the shophouse market in Singapore remained strong in the third quarter of 2024, according to the latest quarterly report by Huttons Asia published on November 12. The report showed that there were 18 caveats lodged for shophouses in Q3, lower than the 21 recorded in the previous quarter. The total transacted quantum for these shophouses was $138.9 million, a 28.8% decrease from the previous quarter’s $195.1 million.
Compared to the same period in 2023, when the total quantum was $278.6 million, this represents a 50% decrease. The first nine months of 2024 saw 62 shophouses sold, a 46.1% decline year-on-year from the previous year. The total value of these transactions in the same period was $519 million, a 48.5% decrease from the same period in 2023.
Despite the decline in the numbers, the report noted that there were a significant number of deals that were not caveated in Q3. According to market sources, several shophouses located in Districts 1 and 2, specifically along Amoy Street, Neil Road, and Telok Ayer Street, were sold for an estimated quantum of over $70 million. This shows that the demand for shophouses has picked up in the past few months, according to Lee Sze Teck, senior director of data analytics at Huttons Asia. He also believes that there will be an increase in transaction volume and quantum in the fourth quarter of 2024.
Shophouses are highly sought after by investors due to their scarcity and potential for strong capital gains. With recent interest rate cuts, they have become increasingly popular as a means of creating and preserving wealth. They are particularly appealing to high-net-worth individuals, family offices, and developers.
Lee notes that shophouses are attractive to investors as they offer attractive returns of around 2.5% to 3% in rental yield in Districts 1 and 2, and up to 4% in the suburbs. Although the initial capital outlay may be high, shophouses are more stable compared to residential properties, as they are typically leased out to commercial or retail tenants for longer periods of time. Additionally, unlike residential properties, shophouses are exempt from the Additional Buyer’s Stamp Duty (ABSD) which has been increased to 20% for foreigners and entities, and 12% for Singaporeans purchasing second or subsequent homes.
Huttons predicts that shophouses in the CBD will continue to appreciate in value due to the government’s plans to revitalize the area. With the relocation of government agencies, development of the Greater Southern Waterfront, and plans for the former Golden Shoe Car Park site, demand for shophouses in the CBD is expected to rise.