Shophouse sales surge and at higher prices in Q1 as high-net-worth investors return: Knight Frank

Published: May 13, 2024 by 
PropertyGiant Singapore
Total transaction value for freehold shophouse units sold in Q1 is up 44 per cent from the previous quarter at s$149.9 million. Photo: BT File
Total transaction value for freehold shophouse units sold in Q1 is up 44 per cent from the previous quarter at s$149.9 million. Photo: BT File

Sales of shophouses in Singapore rose 52.2 per cent to S$169.1 million in the first quarter of 2024 from the previous quarter, as interest from high-net-worth investors returned, said a report by property consultancy Knight Frank.

More deals of larger quantums were completed during the quarter, the data showed. Shophouse deals totalled 20 in Q1 with 17 freehold units and three leasehold units sold. In the previous quarter, a total of 16 shophouses were sold, 25 per cent less than in Q1.

Overall average unit price rose 27.1 per cent to S$5,566 per square foot (psf) on land, compared with the S$4,380 psf on land in Q4 2023.

In 2023, shophouse sales came to 132 units worth S$1.2 billion. The number of units was 31 per cent lower than the 191 units transacted in 2022 worth S$1.6 billion. Shophouse sales have fallen from their peak in 2021, when a total of 254 units worth S$1.94 billion changed hands.

Lee Sze Teck, Huttons Asia’s senior director of data analytics, in a separate report on shophouses, said: “The revival of interest in the shophouse market may be due to the Singapore Police Force initiating the process to sell shophouses linked to the money laundering probe. There was some uncertainty over how and when these shophouses will be disposed of.”

He said that the clarity over the process and prices brought buyers back to the market, which led to slightly more transactions in Q1 2024.

The Q1 sales reported by Knight Frank did not include sales of any shophouses that were seized in the money laundering probe, that were eventually released for sale to repay creditors.

Total transaction value for freehold shophouse units sold in Q1 rose 44 per cent from the previous quarter at S$149.9 million. Leasehold unit sales came to S$19.2 million, up 175.9 per cent from Q4 2023.

For freehold shophouses, average unit price increased 10.9 per cent over the quarter to S$5,671 psf on land, from S$5,115 psf on land. Leasehold shophouses showed a steeper surge, with the average unit price rising 243.9 per cent to S$4,895 psf on land, from S$1,423 psf on land in Q4 2023.

Since Additional Buyer’s Stamp Duty (ABSD) rates were hiked upwards last year for foreign buyers and investors buying residential property, interest has filtered into non-residential assets, with agents reporting increased interest in commercial properties such as shophouses.

The first quarter of 2024 saw six deals that were signed above S$10 million, three of which were above S$15 million, based on Knight Frank’s report.

District 8, which consists of Little India, Farrer Park and Serangoon Road, stood out with the highest number of sales. Seven shophouses changed hands, amounting to a total transaction value of S$51.6 million.

The biggest deal in Q1 was for the sale of a freehold shophouse at Pagoda Street in District 1 for $19 million, said Huttons.

“The seller made an estimated S$2.75 million after holding it for around five years,” Lee told The Business Times (Singapore).

Shophouse leasing volume, meanwhile, slipped during the quarter. The number of rental contracts for shophouses was 5.6 per cent lower quarter on quarter, and 7.2 per cent lower compared with the year-ago period. Median rents continued to hold firm, inching up by 1.9 per cent in Q1, said Huttons.

Mr Lee expects confidence to gradually return to the shophouse market, with the uncertainty over the shophouses implicated in the money laundering probe removed.

He said: “The shophouse market is expected to see steady interest from investors in the coming quarters. The rarity of shophouses, the lower barrier to entry for foreign investors compared to the residential market, and the potential for capital appreciation will support prices in the market”. Knight Frank projects the sales volume of shophouses to be between $1.1 billion and $1.2 billion for the rest of 2024.

Credit: The Business Times

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