Why are more and more foreign investors buying shophouses in Singapore?
The first quarter of 2021 sees a total of S$328.3 million worth of shophouse transactions in Singapore. Many foreign investors especially from China, Hong Kong and Malaysia are showing great interest in these shophouse properties. What are the reasons?
Is it because shophouses are able to retain value even during a downturn or crisis?
Or does it just make an excellent investment for a family office in the new normal?
Let’s find out!
Some of the key highlights of shophouse transactions in the past 6 months
- In the first quarter of 2021, 51 shophouse transactions worth S$328.3 have taken place.
- In the fourth quarter of 2020, 57 sales were made amounting to S$462.8 million.
- Recently, a foreigner bought a shophouse in 22 and 23 Mosque Street at S$21.5 million.
- Another shophouse at 81 South Bridge Road was sold at S$15.7 million.
What is the secret of soaring shophouse demand amid pandemic?
The pent up demand, reasonably lower borrowing cost and high liquidity in the market has made shophouses one of the hottest properties for foreign buyers.
- They find shophouses a defensive asset which can sustain even in market volatility.
- Singapore currency is another key factor for such foreign investors.
- They think shophouses in Singapore are excellent investments to hedge against the currency risk in their home country.
- Foreign buyers are using shophouses as a means of their capital preservation and appreciation.
What are the primary intended uses of shophouses for foreign buyers?
Shophouses are a hybrid of a house slash business venue. So, it gives foreign buyers double the opportunity to profit from the investment. They can use it as a co-living hub, a safety net for their institution fund during crises as well as a family office.
Why is this a good time for foreign investors to invest in shophouses in Singapore?
The roll out of Covid vaccines are uplifting the sentiment of people. The Singaporean communities are more adjusted to the new normal and things are slowly returning to control. Employees and tenants are starting to come back to the workplace. As a result, the vacancy rate of commercial properties are falling.
Soon, these elevated positive factors would be reflected in the property market, raising its demand and prices. So, foreign investors think now is a great time to invest in shophouse before the uplifting economy leads to a surge in price in shophouses.
Besides, the exempted additional buyer’s stamp duty (ABSD) offers a great entry point for foreign buyers to easily afford the shophouses. They find this a favourable option to run their business as well as have a place to stay as more and more people are now working from home.
What is the shophouse market outlook in 2021?
The tight supply of shophouses combined with increasing need for family offices are expected to lead shophouse demand even more in 2021. This is true especially for foreign buyers as they are the most popular properties for these offshore investors. The many purposes and activities allowed in shophouses are giving them multiple opportunities to put the properties in good use.
The shophouses in the fringe areas such as Jalan Besar, Geylang, and Joo Chiat are among the most popular post the pandemic. This is mainly because the shophouses in fringes require lower investment and promise a slightly higher yield than the downtown ones.
More at Foreign buyers, family offices and funds prop up demand for shophouses, CNA
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