Is shophouse the Go-To investment in 2021?

16.7% increase in shophouse sales in 2020 compared to 2019. In the last quarter, Oct-Dec 2020, Singapore reported having sold 18 shophouses, each valued at $10 million, totalling an impressive $288 million.

But why is the market for shophouses so hot? Which shophouses are most in-demand? Who is buying them? Let’s find out!

• 32.7% price drop in shophouses to S$2,692 psf on land on a half-yearly basis in the first quarter of 2020. 
• For leasehold shophouses, the price dropped to S$3,591 (30.2% from the previous year).

This temporary dip in the prices have caused a buying frenzy among investors as now they can grab the shophouses at moderate price.

Source: URA

3 adjoining shophouses on Craig Road 8, 9 and 10 have been sold at S$ 29.28 million.

The 3-storey shophouses have been changing hands from a Hong Kong based Harilela Group to a 8M Real Estate, a Singapore investment group. The upper levels of the 67 years leased shophouses are designed for 4-6 office spaces while the ground floors are fully leased for 3 restaurants.

The usage of the shophouses for both office and restaurant has given them a more attractive prospect for the investor since more high ultra net worths are looking to settle their offices in Singapore and the F&B industry has always had a thriving market in the country.

Other notable shophouses that has been sold in 2020 were:

• A 2-storey freehold shophouse in Holland Village with a gym in the upper floor and Harry’s Bar in the ground floor. It was sold at a gross yield of 2.5% on the transacted price of S$17.2 million.

• Another shophouse with a 999-year leasehold site on 198 South Bridge Road has been bought by an affiliate of Clifton Partners, a local property investment group at S$27 million.

• The same group bought another 999 years leasehold shophouse at 89 Amoy Street for S$29.8 million.

Who is buying them?

Local Investment groups, High ultra net worths, parties from China and India.

While shophouses have always been in demand, the above parties are finding particular interest in shophouses in the face of the pandemic. As you can observe from above, all the shophouses are being sold for much above $10 million. With opportunities to open cafes, bars, restaurants and office houses, shophouses are becoming an attractive centre for booming businesses.

Usually, foreign investors show more interest in the shophouses. However, the current surge in shophouses show that the interest is not limited to foreign buyers only. Many locals are also taking renewed interest in shophouses to own a part of their culture.

What type of shophouses are most attractive to investors?

The most sought after shophouses are in District 1, the financial district, as it proposes more opportunities for investors to yield profit for businesses.

The more leasehold years a shophouse has, the more it is in demand!

Notice from the above shophouses that were sold in 2020. 

3 adjoining shophouses on Craig Road with 67 leasehold years have been sold at S$29.28 million while a single shophouse at 198 South Bridge Road with 999 leasehold year has been sold at S$27 million. Why?

Because the shophouse owner with a longer leasehold year has a chance to grow his legacy over multigeneration while a short leasehold year means they can only use it for a short period of time and cannot change hands in their families.

Shophouses being the heritage and culture of Singapore’s history is a rare and most sought after property in Singapore. So, if anyone gets to hold a part of Singapore history, it is natural they will want to pay a little bit more to hold it on for a longer period.

The more allowable opportunities for commercial development, the more demand!

Shophouses are of many different shapes and sizes. Besides, some shophouses can be used for just residential and office purposes while others are more flexible to open as a hotel, gym, cafe, bar, restaurants, entertainment centre, etc.

If a shophouse is approved to have a restaurant or a hotel, it is more in demand than one with only residential facilities. This is because this type of shophouses has more opportunities of bringing businesses and earning greater returns.

Where can you find the most demanding shophouses?

If you are looking for a shophouse, there is one at Boat Quay. The 199-year leasehold conservation shophouse will make for an excellent investment. Other shophouses can be found in these areas:

• Tanjong Pagar
• Outram Park
• Craig Road
• Desker Road
• Holland Village

Here are the top 10 shophouses available in the market for you to grab!

Source: Squarefoot.com.sg

What’s in store for shophouses in 2021?

In 2020, S$862 million worth of shophouse deals have been transacted.

Being a part of the commercial aspect, shophouses have great investment potential in this year. In 2020, commercial properties were one of the sectors which floated almost unscathed. They made 52% of the overall asset transactions in Singapore.

Looking at 2021, everyone is looking at growing their earnings and revenues. The focus is on industrial and commercial properties, which have potential in terms of logistic, income and redevelopment. 

Shophouse fits right into these criteria as it proposes all these qualities to their owners. The shophouse owner can refurbish the upper floor as residential quarter and the lower floor for business, or office space. It can be a good long term investment as it proposes regular rental income, and capital preservation.

If you want to know more about shophouses, now is a good time to tap into it. If you need guidance, you can always contact me here to help you get more information.

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