Anjia SG Shophouse Property Report Q1 2022
Overview
The shophouse market had a remarkable year in 2021, with a total of 251 transactions amounting to S$1.9 billion, setting a new annual sales record. Global uncertainties increased significantly this quarter due to escalating geopolitical tensions in Eastern Europe and rising inflation. It is expected that commercial shophouses in Singapore, as a safe-haven asset, will continue to be sought after by investors in Q1 2022.
Furthermore, after the latest round of cooling measures in December 2021 curbed the active residential market, some investors have been looking for opportunities to invest in shophouses, adding to the strong demand in the shophouse market. Additionally, as Singapore transitions to living with COVID-19 and eases travel restrictions and safe management measures, the outlook for the shophouse market has become quite bright.
Shophouse Transactions in Q1 2022
• According to caveats lodged, there were a total of 51 shophouse transactions in Q1 2022, a 15% decrease from the 60 transactions in Q4 2021. The decline in sales volume may be due to the limited supply of shophouses for sale.
• Although caveat data from the URA Realis system shows a total of 51 shophouses transacted in Q1 2022, the actual number may be higher as some buyers may not have lodged caveats.
• The transaction value for this quarter reached S$471 million, a 22% decline from the previous quarter. However, the transaction value saw a year-on-year increase of 29%.
• Due to the surge in shophouse sales in 2021, the limited supply of shophouses for sale may weaken the sales momentum in prime districts (Districts 1 and 2) in the short term.
• Meanwhile, Anjia SG expects sales in city fringe areas such as District 8 – Jalan Besar and District 14 – Geylang to remain high, due to their relatively lower prices and larger number of available shophouses for sale.
Transaction Hotspots in Q1 2022
• Of the 51 shophouse transactions in Q1 2022, the majority were located in the RCR and other regions. District 8 (Little India, Jalan
Besar) had the highest sales volume with 15 units. This was followed by 9 shophouse transactions in District 7 (Kampong Glam) and 5 transactions in District 14 (Geylang, Eunos).
• In terms of transaction value, District 7 topped the list, achieving a total transaction value of S$145 million in Q1 2022. It was followed by District 1, with a total transaction value of S$92 million. The sale of Hotel Clover for S$74.8 million significantly boosted the total transaction value in District 7, accounting for nearly half of the district’s total for the quarter.
Top 5 Most Expensive Shophouse Transactions in Q1 2022
• Based on caveats lodged, the highest transaction in Q1 2022 was the acquisition of Hotel Clover for S$74.8 million. It is located along Jalan Sultan in the Kampong Glam area, translating to a unit price of S$4,921 per square foot on land area.
• In terms of price, this transaction is one of the most expensive shophouse deals ever recorded. The previous record was the sale of the Porcelain Hotel for S$63 million in March 2018.
• Hotel Clover consists of a row of 17 conserved shophouse units. The buyer is an entity majority-held by Weave Living, a Hong Kong-based rental accommodation company.
Shophouse Prices
• In terms of unit price on land area ($ psf), shophouse prices in popular districts (Districts 1, 2, 7, 8, 14, 15) saw varying degrees of increase in the first quarter, while prices in other parts of Singapore contracted significantly.
• The average transacted price* for freehold and 999-year leasehold shophouses in D1/D2, D7/D8, and D14/D15 on a land area basis all saw varying degrees of growth in Q1 2022. Among them, D7/D8 recorded the largest quarterly increase, with a 23.3% quarter-on-quarter growth.
• Meanwhile, freehold and 999-year leasehold shophouses in other parts of Singapore contracted by nearly 36% quarter-on-quarter.
• The average unit price on land area for 99-year leasehold shophouses in D1/D2 rose by 14.6% in Q1 2022, while the price for 99-year leasehold shophouses in D7/D8 fell by 12.7%.
• As investors continue to compete for the limited number of shophouses for sale, capital appreciation for shophouses will remain firm. An increasing number of shophouse owners will adjust their asking prices, especially those owning shophouses in prime locations.
• Of the 51 shophouses sold in Q1 2022, about 31%, or 16 transactions, were priced between S$5 million and S$10 million, up from 13 transactions in the previous quarter. According to caveat records, the number of high-value transactions exceeding S$10 million was relatively small in Q1 2022, with 14 deals, compared to 18 in Q4 2021.
*Average unit price is calculated based on land area. If calculated based on gross floor area (which varies depending on the number of storeys of the shophouse), the transaction price tends to be higher.
Rental Profile
• In Q1 2022, the rental market remained subdued, partly due to festive celebrations. A total of 881 lease contracts were signed in Q1 2022, down from 892 contracts in Q4 2021, while the total rental value decreased from S$8.17 million in Q4 2021 to S$8.11 million.
• Despite the subdued rental activity this quarter, shophouse rents continued to grow in Q1 2022, with the median rent increasing from S$5.04 psf per month in Q4 2021 to S$5.38 psf per month.
• With the significant easing of travel restrictions and safe management measures, tourists and employees will return to popular areas hard-hit by pandemic restrictions. Tenant demand for shophouse spaces in tourist and nightlife districts is expected to see a significant increase.
Market Outlook
The demand and prices for commercial shophouses are expected to remain strong in the short to medium term. The further reopening of our economy and borders, the easing of social gathering limits (from 5 to 10 people), and the increase in the number of people returning to the workplace will support the businesses of many shophouse tenants, especially those in tourist attractions and the Central Business District. With improved market sentiment, there is also upside potential for rental growth.
As commercial shophouses are not subject to Additional Buyer’s Stamp Duty (ABSD) and Seller’s Stamp Duty (SSD), they will be popular with family offices and high-net-worth individuals from Singapore and abroad.
However, the strong demand is unlikely to be met due to the limited supply of shophouses for sale, which will keep prices high this year, especially for prime shophouse units in prime locations.
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