SINGAPORE - Shophouse transactions hit nearly $2 billion last year, exceeding the combined sales for both 2019 and 2020, as investor interest for defensive assets soared during the Covid-19 pandemic, according to a report by Knight Frank Singapore.
The latest round of property cooling measures is likely to lend more cachet to this asset class as commercially zoned shophouses are exempt from additional buyer's stamp duty and seller's stamp duty, said market observers. Foreigners are allowed to buy fully zoned commercial shophouses that are approved for commercial use.
Steady gentrification in shophouse districts will also continue to fuel demand, and it is expected that the total sales value for the shophouse market could reach $2 billion in 2022, said Ms Mary Sai, executive director of capital markets for Knight Frank Singapore.
According to the real estate consultancy, shophouse transactions here reached an all-time high of $1.9 billion in 2021, compared with $915.9 million in 2019 and $912.7 million in 2020.
Analysts say this is due to a recovering economy, low interest rates and keen demand as shophouses offer capital preservation due to their strong heritage value and limited stock.
While the 244 shophouse transactions in 2021 was lower than the most recent high of 291 in 2012, overall sales value hit a new peak last year as more than half of the recorded shophouse deals were above $5 million, according to Knight Frank Singapore.
There were 194 freehold shophouse deals worth $1.5 billion last year, up from 128 deals totalling $789.6 million in 2020.
Leasehold shophouses also saw a spike in deal volume to 50 last year, from 17 in 2020. About 60 per cent of leasehold transactions were in prime Districts 1 and 2, with the Tanjong Pagar conservation area posting 22 such transactions averaging $8.8 million each, Ms Sai said.
JLL, which is marketing a conservation shophouse at 51 Neil Road with approval for food and beverage use, said the property is positioned between the Keong Saik and Duxton Hill enclaves - two established F&B and lifestyle destinations, and near the upcoming Maxwell MRT station.
The guide price is $16.2 million, which works out to $2,700 per sq ft (psf) on the approximate built-up area, JLL said.
Ms Kate Leong, director at JLL Capital Markets, said: "51 Neil Road is in the Tanjong Pagar precinct, where substantial rejuvenation and transformation are under way."
According to Knight Frank Singapore, unit prices of freehold shophouses averaged about $4,414 psf on land in 2021, a 19.6 per cent jump year on year, while those of leasehold shophouses averaged $5,100 psf on land in 2021.
Ms Sai noted: "As a majority of leasehold sales were in prime Districts 1 and 2, average leasehold unit prices were about 15.5 per cent higher than freehold sales, which were predominantly in Districts 8, 14 or 15.
"The popular Districts 1 and 2 are largely gentrified areas commanding price premiums. Other areas such as Little India in District 8, while more affordable, are following on the gentrification journey.
"The gentrification process is still in early stages in districts such as Joo Chiat, but renewal can be expected sooner rather than later."
Several bulk sales or collective deals last year also contributed to 2021's deal volumes.
The top deal last year went to the collective sale of three adjoining mixed-use redevelopment sites at Bukit Timah/Duke's Road for $53.9 million.
Separately, the sale of Porcelain Hotel in the Kreta Ayer conservation area to RB Family Office was completed for $90 million over two land plots.
A pair of shophouses at 202 and 204 South Bridge Road was sold in August for almost 10 times its initial price of $35 million, after being held for more than 15 years by a Singapore-incorporated company owned by a Chinese citizen, Ms Sai said.