Q4 2021 Shophouse Report
Although Q4 2021 showed slightly weaker performance during the year-end festive season and border reopening, the shophouse market’s sales performance for the full year was extraordinary, with both transaction value and prices hitting record highs. Over the past year, the rampant COVID-19 pandemic and global uncertainties have driven a surge in demand for shophouses. While many countries struggled to combat the pandemic, Singapore progressively rolled out its vaccination program and effectively reopened its economy. This, coupled with excess market liquidity and a low-interest-rate environment, helped stimulate investor demand for shophouses.
On December 16, 2021, the government introduced a series of property cooling measures, including raising the Additional Buyer’s Stamp Duty (ABSD) rates for foreigners and property investors purchasing residential real estate. In 2022, commercial properties like shophouses are likely to attract more attention from investors and foreigners looking to protect and grow their wealth.
2021 Shophouse Transactions
• According to caveat records, there were 55 shophouse transactions in Q4 2021, an 11.3% decrease from the 62 transactions in Q3 2021. The decline in sales volume was due to the limited supply of shophouses available for sale.
• The total shophouse transaction volume for the full year 2021 was 245 units, surpassing records from the past 8 years.
• The total transaction value in 2021 reached a record high of S$1.8872 billion, exceeding the previous peak of S$1.46 billion set in 2018.
• Shophouse transactions in 2022 are likely to be driven by investor demand, as they look for alternatives outside the residential market, which has been affected by the new cooling measures.
2021 Shophouse Transaction Hotspots
• Of the 245 shophouse transactions in 2021, the majority were located in the city center and city fringe areas. District 8 (Little India, Jalan Besar) had the
highest sales volume with 72 transactions. This was followed by District 2 (36 transactions) and District 1 (32 transactions), which were primarily snapped up by high-net-worth foreigners and family offices.
• In terms of transaction value, District 1 topped the list, achieving a total value of S$493.8 million in transactions in 2021. It was followed by District 2, with a transaction value of S$398 million.
Top Five Shophouse Transactions of 2021
• Based on submitted caveats, the top transaction for both Q4 and the full year of 2021 was the acquisition of the Porcelain Hotel on Mosque
Street for S$90 million, at a unit price of S$8,872 per square foot on land area. In terms of price, this deal is also one of the most expensive shophouse transactions ever. The previous most expensive transaction was The Rail Mall, which was sold for S$63 million in April 2018.
Shophouse Prices
• In terms of unit price ($ psf on land area), shophouse prices in popular districts (Districts 1, 2, 7, 8, 14, 15) saw varying degrees of increase this year. Shophouses in Districts 1 and 2, especially those located in Telok Ayer, Amoy Street, and Boon Tat Street, were warmly received by foreign buyers. Prices for shophouses in other parts of Singapore
remained stable or saw a slight decrease.
• In 2021, the average transacted unit price* for freehold and 999-year leasehold shophouses in D1/D2 and D7/D8 increased year-on-year by 10% and 6%, respectively.
• Meanwhile, for 99-year leasehold shophouses in these popular districts, the average unit price on land area in D7/D8 rose by 11.6% in 2021, while that
in D1/D2 surged by 44%—the fastest rate of increase in average shophouse unit price.
• As investors compete for the limited supply of available shophouse properties, the capital appreciation of shophouses will continue to hold firm. Furthermore, an increasing number of owners are expected to revise their asking prices, especially those with properties in prime locations.
• Of the 55 shophouses sold in Q4 2021, about 20% or 11 transactions were priced between S$5 million and S$10 million, a slight decrease from the previous quarter’s
20 such transactions. According to caveats, there were 18 high-value transactions exceeding S$10 million in Q4 2021, compared to 10 in Q3.
*Average unit price is calculated based on land area. If calculated by gross floor area (which varies depending on the number of storeys of the shophouse), the transacted price would tend to be higher.
Shophouse Rental Overview
• In Q4 2021, the rental market showed slight signs of cooling compared to the previous quarter, partly because some decision-makers were out of the country during the festive season. A total of 882 lease contracts were signed this quarter, down from 914 in Q3 2021, while the total rental value decreased slightly from S$8.3 million in Q3 2021 to S$8.08 million.
• Shophouse rents remained firm in 2021, but some weak spots persisted, especially in tourist areas and for consumer-facing shops that were affected by COVID-19 restrictions this
year.
• However, shophouse leasing activity remained strong in 2021 despite the pandemic. A total of 3,535 leases were signed for the full year, making it the busiest year for rental transactions.
• Meanwhile, the total lease value for the year was S$31.3 million, surpassing the previous peak of S$28.9 million in 2019.
Shophouse Property Market Outlook
From January 2022, work-from-home is no longer the default mode of work in Singapore. With the easing of dine-in regulations and more tourists visiting Singapore, this will boost shophouse tenants in the service industry. It is expected that unless the COVID-19 situation becomes more severe, rental demand in 2022 will grow with the easing of restrictions and the progressive rollout of vaccine boosters.
AnjiaSG‘s veteran local real estate agent Leo Kwek predicts that the popularity of the shophouse market as an investment asset will rise further in 2022. Foreigners and investors will pay more attention to investment options outside of residential property to avoid the newly revised high Additional Buyer’s Stamp Duty rates. This new wave of demand will boost market confidence and support shophouse asking prices. However, due to the limited number of shophouses available for sale, a significant increase in sales volume is not expected.
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