_Shophouse Market Update H2 2023

A quiet year end for an active shophouse market

February 07, 2024

The shophouse market was active for most of 2023, only to quiet down towards year-end. Sales volume declined 35.5% to S$428.2 million in H2 2023 from S$728.9 million in H1 2023, and as a result, the total sales value for the whole of 2023 stood at S$1.2 billion. Similarly, the number of shophouse units sold also decreased, with 132 units sold in 2023, 30.9% lower than the previous year when 191 units were sold. On a half-yearly basis, the number of shophouse units that exchanged hands in H2 2023 declined 26.4% to 53 units from 79 units in H1 2023. At the same time, the average unit price fell by 6.1% to S$5,116 psf on land in H2 2023 from S$5,448 psf on land in H1 2023.

District 8 maintained its top position with the highest number of sales, being the only district with more than ten shophouse units transacted during the period from July to December 2023. In the district, a total of 16 units were sold, translating to a total transaction value of S$132.0 million. With the continued gentrification and the completion of Guoco Midtown located along Beach Road, Little India will continue to develop and mature as a hip tourist destination, maintaining demand for shophouses in the area with new owners pivoting to trendy hole-in-the-wall eateries and other eclectic uses.

The fall in shophouse sales activity in the second half of 2023 was a result of buyers beginning to resist improbable price premiums within the wider context of the elevated borrowing environment and business uncertainty, despite demand being intact. Shophouses are a limited historical asset without any new supply. This typically leads to capital appreciation over a medium- to long-term investment horizon. However, sellers need to balance the evergreen popularity of shophouses with the higher levels of caution among buyers and moderate their profit expectations in order for a sale to materialise in the year ahead.

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