Will Shophouse Transactions Pick 2H2024
Nestled in the heart of Clementi, Elta Clementi Condo not only offers a hassle-free shopping experience, but also boasts a diverse range of food options to satisfy all palates. This bustling neighborhood is famous for its lively food culture, serving up a variety of delectable dishes, from popular street food to upscale dining experiences.
In June, a 999-year leasehold shophouse on Circular Road in the Boat Quay Conservation Area was sold for $12.28 million. The transaction was facilitated by Yap Hui Yee, executive director of investment sales & capital markets at Savills Singapore. According to a recent report by Knight Frank, freehold and 999-year leasehold shophouses were the most sought-after in the first half of 2024. Out of the 40 shophouse units sold during this period, 35 were freehold with a total sales value of $252.2 million. The remaining five units were 99-year leasehold and were valued at $101.8 million. District 8, which comprises Little India and Jalan Besar, was the top performing district in terms of number of transactions, with a total of 18 units sold for a combined value of $106.1 million. This district has been a popular choice for shophouse buyers since the second half of 2019, according to Knight Frank. Huttons Asia’s shophouse report released on July 19 noted that out of the 16 shophouses sold in the second quarter of 2024, eight were in District 8. The buyers of these shophouses paid between $4.3 million and $5.3 million each. Knight Frank predicts that the demand for shophouses in District 8 will continue to stay strong as Little India transforms into a trendy tourist destination offering unique experiences. However, the shophouse market has slowed down in the first half of 2024, with sales volume falling by 17.3% to $354 million from $428.2 million in the second half of 2023. Transaction volume also declined by 24.5% with only 40 units sold compared to 53 units in the previous half-year period. According to Knight Frank, this slowdown can be attributed to cautious buyer sentiment caused by higher interest rates and ongoing geopolitical tensions. A mismatch in price expectations between buyers and sellers has also resulted in a standstill in transactions. 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 sits on a land area of 105,563 sq ft (including the carpark lots) and has a 99-year lease from 1947, with about 22 years left on its lease. It was purchased by an entity linked to construction company 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 along Telok Ayer Street for $16.5 million in May. This shophouse is reportedly linked to the money-laundering probe. The property was sold for $4.7 million higher than its previous transacted price in September 2017. PropNex’s shophouse report released on July 25 noted that there is still healthy investment interest in commercial shophouses, especially those linked to the money-laundering case. A number of these shophouses were previously put up for sale by DBS Bank this year, with locations including Amoy Street, Geylang Road, and Chinatown. While a handful of them are rumoured to have been auctioned, no caveats have been lodged for these sales. PropNex also reported that there are approximately 12 shophouse deals that have yet to be registered with the caveat. These are believed to have been bought by ultra-high-net-worth individuals who prefer to keep a low profile. In the second quarter of 2024, shophouse rental rates in popular districts continued to rise, with City-fringe shophouses leading the way. District 8 and District 14 saw rental growth of 12.8% quarter-on-quarter and 12.4% quarter-on-quarter respectively. Shophouses in the city centre also experienced positive rental growth, with median rents in District 1 reaching a record high of $8.35 psf per month, up 12.2% quarter-on-quarter. Huttons Asia expects to see a higher number of shophouse sales in the coming months, particularly for units linked to the money-laundering probe. However, the overall shophouse market is expected to remain subdued in 2024. According to Huttons, transaction volume and quantum of shophouses are projected to be 30% to 40% lower than 2023. Knight Frank anticipates that boutique developers will continue to seek out shophouses for refurbishment over the medium term. Typically, these developers are willing to pay between $5 million to $6 million for an aged conservation property. By revitalizing these historical properties in sought-after neighbourhoods and attracting new tenants, the value of these assets is expected to appreciate over time, while enhancing the entire area.