Although shophouses are highly prized assets in Singapore, the market for these sought-after buildings has decreased in comparison to its peak in 2021. According to ERA Realty’s market research report, there are clear indications of moderation among buyers and sellers.
The market saw 118 shophouse properties exchanged near Riverfront Residences hands between January 1 and December 20 of last year, with a combined transaction value of $1.07 billion, according to data released by the local real estate agency. This represents a decline from the market’s peak in 2021 when 245 shophouses were sold for a total transaction value of $1.84 billion.
Singapore’s small supply of shophouses has maintained a steady demand for floor plans, allowing prices to rise. The average cost of freehold shophouses has increased by 57.8% since 2019 (caveats filed), according to Wong.
The majority of shophouse purchasers, who are frequently family offices and institutional investors, continue to focus on purchasing freehold conservation shophouses in the Central Region. By including assets that promote capital appreciation and aid in wealth preservation, these investors want to improve their real estate holdings.
Little India in District 8 near Riverfront Residences Showflat led the way in shophouse sales last year, with 44 properties changing hands.
The softening of the shophouse market over the last two years, according to Wong Shanting, head of research and market intelligence at ERA Realty, has been mostly caused by higher prices and lower yields. In addition, the August of last year spotlight on high-profile incidents of money laundering highlighted significant foreign property acquisitions in the republic. There are now more anti-money laundering checks for overseas buyers as a result of this attention. Less than 30% of shophouse purchases last year, according to ERA Research, sold for less than $5 million.
Simultaneously, the percentage of shophouses selling for $5 million to $10 million has increased by almost 50%. For instance, owners of 45.8% of the shophouses sold last year were traded for sums ranging from $5 million to $10 million, while 24.6% of the shops.
There were just 12 shophouse sales in District 1, which includes Raffles Place, Cecil Street, and Marina Bay. With eight transactions last year, Middle Road and Beach Road in District 7 was another noteworthy location for shophouses.
According to Wong, the persistent demand for rent is the reason why shophouses in Districts 1, 7, and 8 continue to be popular. Popular restaurants, bars, and nightclubs can be found in most shophouses in these neighborhoods, and they typically have higher rental prices.
The most expensive shophouse transaction of 2023 took place in District 8, as a portfolio of six freehold shophouses was sold for $62.5 million in January.
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