Shophouse market sees lower transactions and rents in 3Q2023: PropNex

The commercial shophouse market saw more muted activity in 3Q2023, with transactions and rents easing compared to the previous quarter and a total of 38 shophouse transactions recorded in 3Q2023 based on caveats lodged, a 19% q-o-q drop from 47 deals registered in 2Q2023. Similarly, shophouse transaction value fell 19% q-o-q to clock $350.8 million in 3Q2023.

PropNex Realty asserts that the tightening of additional buyer’s stamp duty (ABSD) rates likely diverted some foreigner and investor interest towards commercial properties and the softening economic sentiment in the second half of the year, along with an anti-money laundering blitz that kicked off in August, could have contributed to the slower sales.

The 3Q2023 figures bring total shophouse deals for the first nine months of the year to 117 transactions worth $1.1 billion, in comparison to the same period in 2022 at 155 deals, with a total value of $1.3 billion.

On a y-o-y basis, shophouse deals were up 5.6% with transaction value growing 2.3% higher. Most of the 38 shophouse deals in 3Q2023 took place in fringe areas such as Districts 8 and 14. District 8, which includes the Little India and Jalan Besar areas, saw the highest number of transactions at nine units worth $84.5 million; District 14, covering Geylang and Eunos, saw six deals, followed by District 12 (Balestier, Toa Payoh and Serangoon) with five shophouse transactions and Districts 1 and 2 registering 3 and 2 deals respectively.

The single largest shophouse transaction in 3Q2023 was the sale of a three-storey shophouse along Cheong Chin Nam Road in the Beauty World area in District 21. The freehold shophouse, which has an area of 11,947 sq ft, changed hands for $41 million or $3,432 psf in September and the second largest deal was for a row of three adjoining freehold shophouses on Jalan Besar at $38.5 million ($6,037 psf).

The Senja Close EC development has the necessary facilities and amenities to ensure its residents’ satisfaction. They include a cable car link to the Jurong Lakeside Garden, a guardhouse, swimming pool, tennis courts, and a gym. With all these advantages, Senja Close EC is an ideal development site for those who want to be in close proximity to the bustling city.

In terms of price trends, PropNex observes price growth across districts was uneven in 3Q2023 with freehold and 999-year leasehold shophouses in Districts 7 and 8 growing 7.3% q-o-q to $5,679 psf; while in Districts 14 and 15, prices plunged 39.4% q-o-q to $2,375 psf. Prices in Districts 1 and 2 also declined, falling 13.2% q-o-q to $14,333 psf.

Meanwhile, for 99-year leasehold shophouses, price averages in Districts 7 and 8 rose 12% q-o-q to $5,059 psf, while prices in Districts 1 and 2 rose 3.9% q-o-q to $9,623 psf, and the rest of Singapore fell 12.8% q-o-q to $675 psf.

Median shophouse rents in 3Q2023 also eased 3.9% q-o-q from the peak of $6.21 psf pm logged in 2Q2023 to $5.97 psf per month, while leasing volume was steady with 926 rental contracts valued at $9.2 million signed last quarter.

Overall, 2,756 shophouse rental transactions worth $28.3 million took place in the first nine months of 2023, exceeding the 2,685 transactions valued at $25.4 million achieved across the same period last year.

The scarcity and defensive nature of shophouses’ assets, together with stable occupier demand coming from businesses looking to acquire space post-pandemic, have been keeping investment appetite for shophouses fairly resilient.

PropNex believes 2023 will likely see a more subdued performance, as there are limited selection of choice shophouses available for sale, coupled with firm prices arising from the segment’s growth in recent years.

That said, the firm believes the ongoing tourism recovery and the growth in the services sector will support the shophouse rental market, predicting full-year shophouse rental transactions this year to be on a par with or possibly exceed 2022’s performance of 3,589 contracts worth $34 million.