Will Shophouse Transactions Pick 2H2024
In June, a shophouse with a 999-year leasehold in the Boat Quay Conservation Area on Circular Road was sold for $12.28 million. The transaction was facilitated by Yap Hui Yee, executive director of investment sales and capital markets at Savills Singapore.
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According to a recent report by Knight Frank, freehold and 999-year leasehold shophouses dominated the market in the first half of 2024. Out of the 40 shophouses sold during this period, 35 were freehold with a total sales value of $252.2 million, while the remaining five were 99-year leasehold properties valued at $101.8 million.
District 8, which includes Little India and Jalan Besar, was the top performing area for shophouse sales, recording the highest number of transactions since the second half of 2019. In the first half of 2024, 18 shophouses were sold in this district, totaling $106.1 million in sales value.
However, Knight Frank notes that the overall shophouse market was subdued in the first half of 2024, with sales volume down 17.3% and transaction volume down 24.5% compared to the second half of 2023. This was attributed to cautious buying sentiment due to factors such as higher interest rates and geopolitical tensions.
One notable transaction during this period was the sale of The Rail Mall in Upper Bukit Timah Road for $78.5 million by Paragon REIT. The mall, which sits on a 99-year leasehold land with 22 years left on its lease, was sold to a company linked to construction firm Woh Hup Holdings.
Another significant transaction was the sale of a three-storey, 999-year leasehold conservation shophouse along Telok Ayer Street, which was linked to a money-laundering probe. This property was sold for $16.5 million in May, $4.7 million higher than its previous transacted price in 2017.
PropNex’s report also noted that there is ongoing interest in commercial shophouses, particularly those linked to the money-laundering probe. However, there were also cases of mismatched price expectations between buyers and sellers, leading to a standstill in transactions.
In terms of rental growth, shophouses in popular districts saw new highs in the second quarter of 2024, with city-fringe shophouses in District 8 and District 14 experiencing the highest growth at 12.8% and 12.4%, respectively. Shophouses in the city center also saw positive rental growth, reaching a record high of $8.35 per square foot per month in District 1.
Looking ahead, Huttons Asia predicts that there will be more shophouse sales in the coming months, particularly for units linked to the money-laundering case. However, the overall shophouse market is expected to remain subdued in 2024, with a projected 30% to 40% decrease in transaction volume and quantum compared to the previous year.
Knight Frank believes that boutique developers will continue to seek out shophouses for renovation and refurbishment, with the aim of increasing the value of the properties over time. This could also contribute to the revitalization of historical neighborhoods as new tenants move in.