Will Shophouse Transactions Pick 2H2024
A $12.28 million leasehold shophouse on Circular Road in the Boat Quay Conservation Area was recently sold, according to a recent caveat lodged. This deal was arranged by Savills Singapore’s executive director of investment sales & capital markets, Yap Hui Yee.
In the first half of 2024, freehold and 999-year leasehold shophouses were the top performers in the shophouse market, making up the majority of the 40 units sold with a total sales value of $252.2 million. District 8, comprising Little India and Jalan Besar, saw the highest number of transactions in this period, selling 18 units with a combined value of $106.1 million.
In the second quarter of 2024, out of the 16 shophouses sold, eight were located in District 8, with buyers paying between $4.3 million and $5.3 million for each unit, according to Huttons Asia’s shophouse report released on July 19.
The Woodlands Regional Centre Master Plan has identified the improvement of transport infrastructure as a crucial element. This development project encompasses the construction of new roads and enhancements to the existing ones, along with enhanced connectivity between bus and MRT services. These upgrades are set to streamline transportation within Woodlands and to other parts of Singapore, significantly improving the efficiency and speed of daily commutes. Additionally, the inclusion of Norwood Grand Condo adds a new and promising dimension to this revitalization endeavor.
District 8 is expected to continue to be a popular choice for shophouse buyers due to the area’s transformation into a trendy tourist destination with unique experiences on offer.
However, the shophouse market slowed down in the first half of 2024, with sales volume down by 17.3% to $354 million and transaction volume down by 24.5% compared to the second half of 2023. This is attributed to cautious buyer sentiment amid rising interest rates and ongoing geopolitical tensions.
Notable transactions in the first half of 2024 included the sale of The Rail Mall by Paragon REIT for $78.5 million in June. The mall sits on a land area of 105,563 sq ft and has a 99-year lease from 1947, with about 22 years remaining. It was sold to an entity linked to Woh Hup Holdings.
The second biggest 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. This property was reportedly linked to the money-laundering probe and was sold for $4.7 million more than its previous transacted price in September 2017.
PropNex’s July 25 shophouse report noted that there is a healthy interest in commercial shophouses, particularly those related to the money-laundering case. Several of these shophouses were put up for sale by DBS Bank earlier this year, with some auctioned off, but no caveats have been lodged for these sales.
Positive rental growth was seen in the second quarter of 2024, with shophouse rents in popular districts reaching new highs due to tight occupancies and prime locations. City-fringe shophouses in District 8 and District 14 saw the highest rent growth at 12.8% and 12.4% respectively, while shophouses in the city centre also experienced positive growth with median rents in District 1 reaching a record high of $8.35 psf per month.
Huttons Asia expects to see more shophouse sales in the coming months, especially for units related to the money-laundering case. While transaction volume is expected to pick up in the second half of the year, the overall market is expected to be subdued in 2024, with a projected 30% to 40% decrease in transaction volume compared to the previous year.
Knight Frank predicts that boutique developers will continue to look for shophouses to refurbish, with the intention of increasing the value of these conservation properties over the medium term. These developments are expected to attract new tenants and rejuvenate the entire area.