New Reporter
04-08-23, 10:08
Shophouse sales rebound to rise 7.2% in H1 following residential ABSD hikes: Knight Frank
Jul 31, 2023
SALES of shophouses in Singapore rose 7.2 per cent in the first half of 2023, as interest returned to a market that had slowed significantly last year after running up in 2021.
Shophouse deals totalled S$711.6 million in value with 75 units transacted in H1 2023, from S$663.5 million across 72 units in H2 2022, according to data collected by real estate consultancy Knight Frank.
Volume and value are still well below the market peak of S$962.8 million transacted in H1 2022, when 119 shophouses were sold.
The latest H1 figures follow a decline in shophouse sales for the second half of 2022, falling some 30 per cent from the earlier half-year period as investors turned wary amid interest rate hikes.
The shophouse market benefitted from two government-introduced changes that came into effect recently: the April implementation of much higher additional buyer’s stamp duty (ABSD) rates on residential property purchases for foreigners, and a rule change involving the zoning of properties in the Residential Property Act.
As ABSD is not applicable to commercial properties like shophouses, such assets became more attractive in the eyes of private wealth buyers comprising high-net-worth investors and family offices, Knight Frank’s capital markets executive director Mary Sai pointed out.
“ABSD and the changes made to the Residential Property Act concerning residential and commercial properties do not affect commercial shophouses. Therefore, more investors might be drawn towards commercial shophouses as the tax cost can potentially be much less, and also, approval to purchase land is not required where the approved use is commercial,” she said.
She estimated that the total number of transactions in H1 2023 is highly likely to exceed the reported number of 75 as some deals were not reported nor had caveats been lodged. Many wealthy buyers value their privacy with a preference for low-key profiles, she noted.
The bulk – or almost 80 per cent – of shophouse sales in H1 2023 were for 999-year or freehold assets, which subsequently had an increase in average price by 13.4 per cent to S$5,338 per square foot (psf) on land from S$4,610 psf in the previous half year.
In contrast, transaction values of leasehold shophouse sales were down by 15.7 per cent to S$139 million from S$164.9 million in H2 2022. Despite the lower sales, there was a substantial increase in average price by 37.6 per cent to S$5,983 psf on land from S$4,348 psf on land in the preceding half year.
Higher prices have sidelined cautious buyers, in a market that ran up in 2021. Shophouse sales in the last half-year (H2 2022) were almost 40 per cent lower year-on-year – a stark contrast from the “record-breaking performance” between H1 2021 and H1 2022, as Knight Frank previously reported.
District 8 stood out as the most popular investment destination, with 27 shophouses sold for a total of S$259.4 million. The transactions were driven by the continued rejuvenation of Little India and its popularity as a tourist attraction.
Fifteen shophouse sales scored returns of more than 100 per cent, led by a S$30 million deal for 37 Boat Quay which yielded capital gains of S$16 million – a profit of 631.7 per cent – after it was held for 23 years.
Sai expects the Singapore shophouse market to recover further as foreign private wealth sources turn from residential property to these heritage assets.
Given the positive momentum in H1 2023, Sai said sales are likely to hit Knight Frank’s earlier projected sales volume of S$1.3 billion to S$1.5 billion for the whole of 2023, slightly under the S$1.6 billion recorded in 2022.
https://www.businesstimes.com.sg/property/shophouse-sales-rebound-rise-72-h1-following-residential-absd-hikes-knight-frank
Jul 31, 2023
SALES of shophouses in Singapore rose 7.2 per cent in the first half of 2023, as interest returned to a market that had slowed significantly last year after running up in 2021.
Shophouse deals totalled S$711.6 million in value with 75 units transacted in H1 2023, from S$663.5 million across 72 units in H2 2022, according to data collected by real estate consultancy Knight Frank.
Volume and value are still well below the market peak of S$962.8 million transacted in H1 2022, when 119 shophouses were sold.
The latest H1 figures follow a decline in shophouse sales for the second half of 2022, falling some 30 per cent from the earlier half-year period as investors turned wary amid interest rate hikes.
The shophouse market benefitted from two government-introduced changes that came into effect recently: the April implementation of much higher additional buyer’s stamp duty (ABSD) rates on residential property purchases for foreigners, and a rule change involving the zoning of properties in the Residential Property Act.
As ABSD is not applicable to commercial properties like shophouses, such assets became more attractive in the eyes of private wealth buyers comprising high-net-worth investors and family offices, Knight Frank’s capital markets executive director Mary Sai pointed out.
“ABSD and the changes made to the Residential Property Act concerning residential and commercial properties do not affect commercial shophouses. Therefore, more investors might be drawn towards commercial shophouses as the tax cost can potentially be much less, and also, approval to purchase land is not required where the approved use is commercial,” she said.
She estimated that the total number of transactions in H1 2023 is highly likely to exceed the reported number of 75 as some deals were not reported nor had caveats been lodged. Many wealthy buyers value their privacy with a preference for low-key profiles, she noted.
The bulk – or almost 80 per cent – of shophouse sales in H1 2023 were for 999-year or freehold assets, which subsequently had an increase in average price by 13.4 per cent to S$5,338 per square foot (psf) on land from S$4,610 psf in the previous half year.
In contrast, transaction values of leasehold shophouse sales were down by 15.7 per cent to S$139 million from S$164.9 million in H2 2022. Despite the lower sales, there was a substantial increase in average price by 37.6 per cent to S$5,983 psf on land from S$4,348 psf on land in the preceding half year.
Higher prices have sidelined cautious buyers, in a market that ran up in 2021. Shophouse sales in the last half-year (H2 2022) were almost 40 per cent lower year-on-year – a stark contrast from the “record-breaking performance” between H1 2021 and H1 2022, as Knight Frank previously reported.
District 8 stood out as the most popular investment destination, with 27 shophouses sold for a total of S$259.4 million. The transactions were driven by the continued rejuvenation of Little India and its popularity as a tourist attraction.
Fifteen shophouse sales scored returns of more than 100 per cent, led by a S$30 million deal for 37 Boat Quay which yielded capital gains of S$16 million – a profit of 631.7 per cent – after it was held for 23 years.
Sai expects the Singapore shophouse market to recover further as foreign private wealth sources turn from residential property to these heritage assets.
Given the positive momentum in H1 2023, Sai said sales are likely to hit Knight Frank’s earlier projected sales volume of S$1.3 billion to S$1.5 billion for the whole of 2023, slightly under the S$1.6 billion recorded in 2022.
https://www.businesstimes.com.sg/property/shophouse-sales-rebound-rise-72-h1-following-residential-absd-hikes-knight-frank