Will Shophouse Transactions Pick 2H2024
A shophouse located on the highly sought-after Circular Road in the Boat Quay Conservation Area was recently sold for $12.28 million, with the deal being facilitated by Yap Hui Yee, executive director of investment sales and capital markets at Savills Singapore. Knight Frank’s report on August 6 revealed that freehold and 999-year leasehold shophouses were in demand in the first half of 2024, with 35 freehold units selling for a total value of $252.2 million. The remaining five units were 99-year leasehold and sold for a combined $101.8 million.
District 8, which includes Little India and Jalan Besar, was the preferred location for shophouse buyers, with 18 units sold for a total of $106.1 million in the first half of 2024. This continued demand for shophouses in District 8, according to Knight Frank, is due to the area’s transformation into a popular tourist destination with unique experiences to offer.
The shophouse market showed a cautious buying sentiment in the first half of 2024, with a 17.3% decrease in sales volume and a 24.5% drop in transaction volume compared to the second half of 2023. According to Knight Frank, this is due to buyers being cautious about higher interest rates and ongoing geopolitical tensions. Additionally, a mismatch in price expectations between sellers and buyers led to a standstill in transactions, as buyers who were involved in a money-laundering case were willing to pay above-market prices for shophouses.
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Notable transactions in the first half of 2024 include the sale of The Rail Mall in Upper Bukit Timah Road for $78.5 million by Paragon REIT in June. The mall, with a land area of 105,563 sq ft and a 99-year lease from 1947, was sold to an entity connected to construction company Woh Hup Holdings. The second largest deal in the second quarter of 2024 was the sale of a three-storey, 999-year leasehold conservation shophouse on Telok Ayer Street for $16.5 million in May, which was $4.7 million more than its previous transaction price in 2017.
PropNex’s July 25 shophouse report noted that investment interest in commercial shophouses remains strong, particularly for shophouses linked to the money-laundering case. DBS Bank reportedly put several of these shophouses up for sale earlier this year, with a handful going to auction, but no caveats have been lodged for these sales. PropNex also mentioned that there were about 12 shophouses without caveats, likely purchased by ultra-high-net-worth individuals who prefer to remain low-profile.
Shophouse rents in popular districts saw significant growth in the second quarter of 2024, with those in District 8 and District 14 (Geylang, Eunos) increasing by 12.8% and 12.4%, respectively. District 1 (Raffles Place, Cecil) also saw a record-high rent of $8.35 psf per month, with a 12.2% quarter-on-quarter growth.
Huttons Asia predicts more shophouse sales in the coming months, particularly those linked to the money-laundering case. However, overall shophouse market activity is expected to be subdued in 2024, with a 30% to 40% decrease in transaction volume and quantum compared to 2023. Knight Frank also expects boutique developers to continue to seek out shophouses in the $5 million to $6 million range, with the intention of refurbishing them and increasing their value over time. This will also contribute to the rejuvenation of historical neighborhoods.
