SINGAPORE RESEARCH COMMERCIAL SALES Q2 2019 SHOPHOUSE MARKET SNAPSHOT Total shophouse sales value decreased to S$209.9 million in Q2 2019 from S$219.90 million in Q1 2019. TOTAL SHOPHOUSE SALES DECLINED IN Q2 ALTHOUGH MORE FREEHOLD SHOPHOUSES EXCHANGED HANDS Overview MARY SAI Shophouse sales in Q2 2019 amounted to S$209.8 million, which was a 4.6% Executive Director, quarter-to-quarter (q-o-q) decline from S$219.9 million in Q1 2019. Investment & Capital Markets The total sales value of freehold shophouses increased more than two-fold to $189.3 million in Q2 2019. However, there was a drop in the sales value of leasehold “Freehold shophouses shophouses, which declined by 84.4% q-o-q to S$20.5 million in Q2 2019. The drop in the city fringe are in sales could be due to leasehold shophouses being held more tightly by owners as becoming more popular. they can command higher yields. They are more affordable There were 32 shophouse transactions lodged in Q2 2019, a 23.0% q-o-q than those in the increase from 26 in Q1 2019. The number of freehold shophouse transactions rose districts 1 and 2 and from 18 in Q1 2019 to 30 transactions in Q2 2019 .In contrast, only two leasehold have substantial upside shophouses were transacted in Q2 2019, as compared to the eight leasehold shophouses in Q1 2019 (Exhibit 5). in capital appreciation especially in areas earmarked for future growth.” Q2 2019 COMMERCIAL SALES RESEARCH BULLETIN SINGAPORE The average price per square feet (psf) of the freehold shophouses increased by 11.6% q-o-q to $3,229 in Q2 2019 (Exhibit 5). Buyers were attracted by the tenure and the upside for further capital appreciation in the next 5 to 10 years. The average price psf of the leasehold shophouses transacted in Q2 was 86.4% higher than the average price psf of freehold shophouses in Q2. The two leasehold shophouses that were sold in Q2 were in better locations and sat on smaller land sizes compared to the freehold shophouses transacted in the same period. Notwithstanding, the average price psf of leasehold shophouses declined by 6.0% q-o-q to $6,019 in Q2 2019 (Exhibit 5). The sale of the shophouse at 2 Cavan Road (freehold) at $38,710,000 tops the transactions in Q2 2019 in terms of quantum (Exhibit 3). The shophouse at 2 Cavan Road presently accommodates a light industrial-cum-warehouse building in a 20,100 square feet (sqft) site and has an under-utilized gross floor area (GFA). The sales value of transactions in Kallang was the highest among the planning areas in Q2. Kallang recorded 5 transactions (such as 2 Cavan Road and 355/357A Jalan Besar Road), amounting to a total sales value of S$62.5 million, in Q2 2019. *Refer to Annex A for Exhibit 1 District 14 has been showing up strongly in shophouse sales in past four quarters, together with Districts 2 and 8. EXHIBIT 2 Districts with the most transactions based on Caveats lodged 12 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 10 8 6 No. of Units 4 2 0 D8 D2 D15 D8 D2 D14 D1 D2 D8 D14 D2 D14 D1 D8 D19 D8 D14 D2 D1 Source: REALIS (as at 27 June 2019), Knight Frank Research Ranking the transactions by quantum in Q2 2019, there were four freehold shophouses and one leasehold shophouse in the top five transactions. The deal with the largest quantum in Q2 2019 was the sale of 2 Cavan Road in Kallang. EXHIBIT 3 Top 5 Deals in Q2 2019 (By Price Quantum) Address Tenure Transacted Unit Price Area (sq ft) Price (S$ psf) (S$ psf) 2 Cavan Road Freehold 38,710,000 1,926 20,096.0 19 Hongkong Street Leasehold 15,000,000 8,074 1,862.2 355/357 Jalan Besar Freehold 9,580,000 3,124 3067.7 57 Temple Street Freehold 8,900,000 8,411 1054.9 273 New Bridge Road Freehold 8,680,000 6,805 1280.9 Source: REALIS, Knight Frank Research Q2 2019 COMMERCIAL SALES RESEARCH BULLETIN SINGAPORE Several shophouses saw a high return over the span of 7 to 9 years. One exception is the sale of 22/22A/22B Sam Leong Road, which yielded the seller a 48.4% return within a year. EXHIBIT 4 Property Gains for Shophouses Transacted in Q2 2019 Address Price Sold in Land Area Return Estimated number Q2 2019 (S$million) (sq ft) of years held 253/253A Jalan Kayu 4.0 1410.1 166.7% 8 57 Temple Street 8.9 1054.9 145.2% 7 17 Blair Road 7.5 2120.5 101.1% 9 19 Blair Road 6.7 2109.7 79.1% 9 517 Serangoon Road 4.7 1593.1 67.1% 7 22/22A/22B Sam Leong Road 6.8 1334.7 48.4% 1 Source: REALIS (as at 27 June 2019), Knight Frank Research Prices of freehold shophouses moved up slightly following a decline in the previous quarter, while prices of leasehold shophouses corrected slightly after last quarter’s significant increase. EXHIBIT 5 Number of Transactions and Average Price psf of Freehold and Leasehold Shophouse Units 7,000 60 FOR COMMERCIAL SALES ENQUIRIES, PLEASE CONTACT: 6,000 50 Mary Sai 5,000 40 Executive Director 4,000 30 Investment & Capital Markets 3,000 6228 6886 20 2,000 [email protected] 1,000 10 No. of Caveats Lodged Average $psf Land Area 0 0 FOR FURTHER INFORMATION, Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 PLEASE CONTACT: CAVEATS LODGED FH (RHS) CAVEATS LODGED LH (RHS) AVERAGE $PSF_FH (LHS) AVERAGE $PSF_LH (LHS) Lee Nai Jia Source: REALIS (as at 27 June 2019), Knight Frank Research Head Research 6228 6878 [email protected] Khoo Zi Ting Market Outlook Analyst Research Shophouses are expected to continue to experience robust demand, especially 6228 7377 conserved shophouses with strong heritage significance. The prices of these [email protected] heritage shophouses are likely to appreciate over time due to their scarcity. Shophouses are also enjoying a new lease of life with the emergence of hidden bars at the rooftops and second floors. Adjoining shophouses are also attractive if they can be used as hotels, given the optimistic outlook in Singapore tourism sector. © Knight Frank Singapore 2019 This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank Pte Ltd and its subsidiaries for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank Pte Ltd and its subsidiaries in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank Pte Ltd to the form and content within which it appears. Knight Frank Pte Ltd is a private limited company which is incorporated in Singapore with company registration number 198205243Z and CEA licence number L3005536J. Our registered office is at 10 Collyer Quay #08-01 Ocean Financial Centre Singapore 049315. For further information about the company, please visit www.knightfrank.com.sg Annex A EXHIBIT 1 Total Value of Shophouse Transactions by Planning Area 0 - 0 0 - 10,000,000 10,000,000 - 20,000,000 20,000,000 - 30,000,000 30,000,000 - 40,000,000 40,000,000 - 50,000,000 50,000,000 - 60,000,000 60,000,000 - 70,000,000 Source: REALIS, Knight Frank Research.