$4.5m profit in 14 months: Soaring demand continues to push up prices of S’pore shophouses

There were 114 shophouse sales in the first six months of the year worth $938.8 million in all. ST PHOTO: DESMOND WEE

SINGAPORE – The owner of a shophouse near Bugis has walked away with a remarkable profit of $4.5 million after owning the property for just 14 months – as stark a sign as any of just how hot the market is for these properties.

The 1,149 sq ft freehold unit at 148 Arab Street was bought for $5.5 million in February 2021 and offloaded in April 2022 for $10 million.

Not surprisingly, it was the most profitable deal ever recorded in the Kampong Glam Conservation Area, noted Urban Redevelopment Authority (URA) data.

Such huge gains are becoming almost routine as tight supply and soaring demand galvanise cashed-up investors.

Take the sale of a three-storey, freehold shophouse in Stanley Street, Chinatown.

It was bought in January 2021 and snapped up by a foreigner for $15.5 million eight months later, reaping the local seller a $4 million profit. That is a gain of around $500,000 a month.

Or the separate shophouse units in Upper Dickson Road that changed hands in less than six months, allowing each seller to walk off with profits of $550,000.

The Kampong Glam Conservation Area is one of the hot spots.

Apart from the Arab Street sale, the area recorded a historical high per square foot (psf) price of $13,821 when a 1,664 sq ft shophouse in Bali Lane was sold for $23 million in August 2022.

There were 114 shophouse sales in the first six months of the year worth $938.8 million in all, compared with $919 million in the same period in 2021, when 131 units sold.

The shophouse sector is poised for further gains following a new wave of demand stemming from foreign investors, said analysts.

Industry observers say it is no surprise that shophouses in various conservation areas have sold at historically high prices given the short supply and high demand.

Mr Leonard Tay, head of research at Knight Frank Singapore, said: “Many owners who have held on to their shophouses for an extended period of time – especially for more than a decade – are taking the chance to tap the limited stock of such asset class by selling it when demand is strong.

“However, as prices of shophouses increase, sellers might face resistance from potential buyers. Nonetheless, conservation shophouses are limited in supply, thus even as prices increase, investors keen on owning such a heritage asset… are willing to pay a premium to purchase one.”

URA Realis data shows historical high psf prices for shophouses in conservation areas such as Little India, Tanjong Pagar, Kampong Glam and Geylang this year.

The highest psf price for Tanjong Pagar was recorded in May when a 1,297 sq ft unit was sold for $10,215 psf or $13.25 million while a 1,075 sq ft unit went for a record psf price of $8,649 or $9.3 million in Little India in the same month.

Around 73 per cent of the 119 caveats for shophouses lodged from January to June were purchases made by companies, 25 per cent were Singaporeans and only 2 per cent were foreigners, mainly from China and India, said Mr Tay.

A caveat is lodged with the Singapore Land Authority and it secures a property for the buyer. However, not all buyers lodged caveats.

Mr Richard Tan, senior group district director at PropNex Realty, said: “I have handled a number of shophouse transactions where the high-net-worth buyers from Indonesia, Malaysia and Hong Kong did not lodge a caveat as they wanted to keep a low profile. Some foreign investors also made their purchases through their companies.

“These buyers see Singapore as a safe haven to park their wealth, especially when data has shown that majority of shophouse sales are profitable. Moreover, there are no restrictions on the number of commercial shophouses foreigners can buy without having to pay any additional buyer stamp duty (ABSD).”

Mr Richard Tan has sold around five shophouses in Amoy Street and Stanley Street over the past two years. ST PHOTO: NG SOR LUAN

Industry observers noted that the market for conservation shophouses in the central business district has been buzzing this year.

There were 114 units sold in the first six months in deals totalling $938.8 million, noted Knight Frank Singapore.

“Prime districts generally offer higher yields because of the high footfall in the areas. The units are easily tenanted, which makes them attractive to investors,” said PropNex’s Mr Tan, who also conducts training courses on commercial shophouse sales.

Mr Tan has sold around five shophouses in Amoy Street and Stanley Street over the past two years.

Industry observers noted that the shophouse market is well-supported by strong fundamental values.

“The key reasons drawing investors to the shophouse market is due to its intrinsic heritage value, scarcity and ability to preserve value,” said Ms Yap Hui Yee, senior director of investment sales and capital markets at Savills Singapore.

“Purchasers see shophouses as an opportunity to hedge against inflation and the volatility in the equity market and other asset classes. So amid the limited supply and high liquidity environment, they will continue to be the preferred asset class for mid-to-long term investments.”

“Source:[$4.5m profit in 14 months: Soaring demand continues to push up prices of S’pore shophouses] © Singapore Press Holdings Limited. Permission required for reproduction”

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