_Shophouse Market Update H2 2022
January 25, 2023
Highlights
- While the shophouse market continued to draw interest in the second half of the 2022, sentiment turned conservative and sales activity contracted, a stark contrast from the record-breaking performance reported every six months between H1 2021 and H1 2022.
- Between July and December 2022, a total of 67 shophouses changed hands for some S$625.2 million, representing a 35.6% and 38.7% decline in transaction value on a half-yearly and y-o-y basis respectively. For the whole of 2022, there was a total of 187 shophouse transactions reflecting a sales value of S$1.6 billion, with most of the activity having took place in the first half of the year.
- Out of the shophouses that exchanged hands in H2 2022, 80.6%, or 54 units, were freehold. This was about half of the sales volume registered half-yearly since 2021, where 102 to 95 units were transacted within each period. As such, the sales volume of freehold shophouses in H2 2022 amounted to S$469.9 million, with a corresponding average price of S$4,802 psf on land.
- Amid the general slowdown in the shophouse market, District 8 remained a hotspot. Between July and December 2022, 26 shophouses exchanged hands for a total of about S$182.5 million, in stark contrast to every other district where there were less than ten transactions each during the same period. The purchase of a row of five conservation shophouses along Jalan Besar by 8M Real Estate for S$40 million in late September led the deals in District 8, among the top five deals in H2 2022.
- Additionally, among the 26 transactions in District 8, a shophouse unit at 35 Rowell Road was sold for S$4.9 million in October 2022, about 21.0% higher than the preceding sale a mere three months back in June when the same unit swapped hands for just under S$4.1 million. Nonetheless, subsequent sales within months of each other remain more the exception than the rule. For most shophouse owners/investors, the longer the unit is held the greater the returns over time where a holding period spanning decades typically results in more than 100% returns.
- With increasing travel as well as the easing of travel restrictions in China, there could be sustained demand from private sources of wealth, comprising high-net-worth investors and family offices from around the region that have a particular interest in this asset class. In addition, locals in Singapore are also scouring the shophouse sector for opportunities.
- However, more shophouse owners are becoming increasingly cognisant that holding the asset over a longer investment horizon very probably leads to exponential price appreciation. As such, some prospective sellers could also have dropped out of the market, especially after the high volume of transactions in the last two years. Notwithstanding the anticipated slowdown in transaction activity in 2023, Districts 7 and 8 would likely continue to attract investors. Drawn by the potential of an upward moving price trend supported by tourist activity in the city fringe and consequent gentrification of these areas, investors could find value purchases at more affordable levels in Districts 7 and 8 when compared to the higher overall prices in Districts 1 and 2.
Read the report here.