Record resale price for coffee shop 'an outlier'

The $31 million deal for Yong Xing Coffee Shop in Bukit Batok caused a stir. But there are three other eating houses nearby to maintain competition in the area, says Mr Khaw.
The $31 million deal for Yong Xing Coffee Shop in Bukit Batok caused a stir. But there are three other eating houses nearby to maintain competition in the area, says Mr Khaw.ST PHOTO: ALPHONSUS CHERN

The recent record resale price of $31 million for a Bukit Batok coffee shop and the $23.8 million transaction in 2013 for another coffee shop in Hougang are outliers, and their sellers are not speculators, National Development Minister Khaw Boon Wan told Parliament.

He was replying to a question from Workers' Party Non-Constituency MP Gerald Giam on whether the Government was concerned about the high transaction prices, and what measures it was taking to mitigate their impact on rentals and cooked food prices.

The sale of Yong Xing Coffee Shop at Bukit Batok Street 11 made headlines last month. Its seller had bought the 4,521 sq ft coffee shop for $3.4 million nearly 20 years ago.

Mr Khaw noted that since January 2010, there had been 32 resales involving eating houses of comparable sizes: 10 were below $5 million, 12 between $5 million and $10 million, and eight between $10 million and $15 million.

"The two transactions at Hougang and Bukit Batok were outliers, but these were market transactions between private entities," he added. "If they overpay and need to charge above market price, they risk losing their customers and becoming insolvent."

Mr Khaw said the Government wanted to ensure HDB residents had access to affordable food, and outlined three ways it did so.

First, HDB no longer sells its eating houses but only lets them out. Second, it ensures there is a sufficient supply of eating houses to maintain competition. In Bukit Batok, there are three other eating houses near Yong Xing Coffee Shop. Third, HDB continues to build new eating houses.

It will build 62 new ones in the next three years, and will ramp up supply if there is demand.

In addition, the National Environment Agency will be building 20 new hawker centres by 2027.

Mr Giam asked if the Government would consider stepping in to prevent speculation and requiring HDB eating houses to be sold back only to HDB so as to control rents and food prices.

Mr Khaw ruled out the idea of speculation in the case of the Bukit Batok coffee shop, noting that the seller had been there 20 years. The seller in Hougang had also been there at least 10 years.

As for forcing shops to be sold back to HDB, Mr Khaw said he did not think he could do so legally.

A version of this article appeared in the print edition of The Straits Times on July 15, 2015, with the headline 'Record resale price for coffee shop 'an outlier''. Print Edition | Subscribe