Shophouses have become“ investors’ newest collector’s item given its potential “ for price appreciation.

MARY SAI, EXECUTIVE DIRECTOR, CAPITAL MARKETS

Singapore Research

MARKET SNAPSHOT 118 Shophouse TOTAL TRANSACTIONS H1 2021 MILLION TOTALS$836.1 TRANSACTIONS VALUE

ALL EYES ON THE HOT knightfrank.com.sg/research SHOPHOUSE MARKET

The total shophouse transaction value hit S$836.1 million in H1 2021, a 29.9% increase While unit prices of freehold compared to H2 2020 as recovery momentum sustained on the back of a pickup in shophouses dipped a marginal 0.4% activity from Q4 2020. From a low of S$117.0 million in Q2 2020, total transaction values from H2 2020 to average S$4,344 psf have since rebounded to S$365.4 and S$470.7 million in Q1 and Q2 2021 respectively. on land in H1 2021, this was however a 59.5% jump compared to the same There were 118 transactions in H1 2021, exceeding the 90 in H2 2020 and the last recent period last year when was high of 99 in H1 2018 (Exhibit 1). While freehold shophouses (78.8%) still accounted grappling with the onset of COVID-19. for the bulk of transactions in H1 2021, leasehold sales volume more than doubled Average leasehold prices increased from H2 2020 to 25 units. Buyers who were drawn by hopes of capital appreciation by 4.9% to S$4,418 psf on land when showed interest in better-located leasehold shophouses, with over half of the leasehold compared to H2 2020 and 23.0% transactions located at the prime District 2 (Anson, Tanjong Pagar). against H1 2020, due to transactions Reflecting initial signs of a shifting interest towards fringe area shophouses, District in the Tanjong Pagar and Kreta Ayer 8 (Little ) recorded the highest sales volume in H1 2021, accounting for over one- Conservation Areas fetching higher fifth (26) of shophouses transacted. A more affordable alternative for investors wanting prices (Exhibit 1). to venture into the increasingly popular shophouse scene, the shophouses in District 8 About 56.8% of the shophouses sold were snapped up at an average of S$4.2 million, with 18 out of the 26 sold at entry prices in the first half of 2021 were above below S$5 million. Similarly in District 15, the average price was below S$4.5 million. S$5 million, a higher proportion Shophouses in the traditionally favoured areas nevertheless remained sought- against the 42.2% in H2 2020. The top after. District 1 (, Cecil, Marina, People’s Park) and 2 recorded 15 and 20 five deals by price quantum were in transactions respectively. Many of the shophouses sold featured main street frontages Districts 1 and 2 (Exhibit 2), where top and operated as F&B businesses such as in , and sold at S$11.5 million on price premiums need to be offered to average. prise these assets from sellers.

A fully tenanted three-storey Exhibit 1: Transaction volume and Average Unit Prices (S$psf on land) conservation shophouse with an attic of Shophouse Units at 91 Tanjong Pagar Road transacted No. of Freehold Units Transacted (RHS) No. of Leasehold Units Transacted (RHS) Average Price of Freehold Units (LHS) Average Price of Leasehold Units (LHS) at more than five times the previous $7,000 180 sale price after being held for about 15

160 $6,000 years (Exhibit 3). Separately, another 140 shophouse at 13 Ann Siang Road was $5,000 120 sold at S$9.3 million, 9.2% above the

$4,000 100 previous sale price after being held for less than a year. $3,000 80

60 Number of Transactions $2,000

Average Unit Price (S$psf on land) Price Unit Average 40 $1,000 20

$- 0 2016 2017 2018 2019 2020 H1 2020 H2 2020 H1 2021 Source: URA Realis, Knight Frank Research, *based on data available as of 2 July 2021 Market outlook Exhibit 2: Top 5 Deals in H1 2021 by Price Quantum Buyers exhibited a continued appetite BUILDING ADDRESS TRANSACTED LAND AREA UNIT PRICE for shophouse assets in the first half PRICE (SQ FT) (S$ PSF ON (S$ MIL) LAND) of 2021. Year 2020 might have been

277, 279 New Bridge characterised by the pandemic and N.A. $28.0 2,541 $11,018 Road (D2) recession, but this does not diminish the fact that in just the first six months N.A. 1 Teck Lim Road (D2) $22.3 1,976 $11,274 of 2021, the total transaction value

22,22A,22B,23 was already 91.6% of the full year 2020 N.A. $21.5 2,688 $7,999 Mosque Street (D1) while the number of units transacted TELOK AYER accounted for 81.4% of last year’s total. CONSERVATION 9 Stanley Street (D1) $17.8 1,408 $12,607 AREA So barring any recurring waves of the TELOK AYER 198 Telok Ayer COVID-19 infection and based on the CONSERVATION $17.4 1,654 $10,505 Street (D1) AREA current demand momentum, it is more

Source: URA Realis, Knight Frank Research, *based on data available as of 2 July 2021 than possible for the sales value in the full year of 2021 to exceed the last S$1.46 billion high posted in 2018, and for sales volume to cross the 200 unit mark. Exhibit 3: Property Gains for Shophouses Transacted in H1 2021 TRANSACTED LAND ESTIMATED In addition, with many still keen to test BUILDING ADDRESS PRICE AREA RETURN NUMBER OF (S$ MIL) (SQ FT) YEARS HELD the market on the offers they can draw, we might see shophouse sales in the 91 Tanjong TANJONG PAGAR Pagar Road $10.5 1,291 460.0% 15.1 second half of the year achieving new CONSERVATION AREA (D2) benchmark prices. While buyers will

131 Joo continue to seek to acquire a collector’s N.A. Chiat Road $2.8 1,086 276.7% 16.5 (15) item to own or operate from, there is an inevitable ceiling to escalating prices BLAIR PLAIN 75 Kampong CONSERVATION $5.6 1,191 270.0% 11.7 where the buyers will start to show Bahru Road (D3) AREA resistance.

TANJONG PAGAR 42 Tras $10.6 1,339 268.1% 10.9 CONSERVATION AREA Street (D2) Recent Publications

213 N.A. Rangoon $3.4 1,966 257.9% 19.0 Road (D8)

Source: URA Realis, Knight Frank Research, *based on data available as of 2 July 2021 EDITION RD SINGAPORE VIEW 23 SHOPHOUSE H2 2020 Contact us for insights, research and real estate opportunities.

Mary Sai Leonard Tay Khoo Zi Ting Executive Director Head Analyst Capital Markets Research Research +65 6228 6886 +65 6228 6854 +65 6228 7377 [email protected] [email protected] [email protected]

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