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16-11-23, 14:26
Singapore’s once-hot shophouse market cools after money laundering bust
Nov 10, 2023
FEWER shophouses changed hands in the third quarter of 2023, as foreign buyers take a breather following the S$2.8 billion money laundering crackdown in August.
There were 37 shophouses sold in Q3, based on data from the Urban Redevelopment Authority compiled by Huttons Asia. This was some 21.3 per cent lower than in the previous quarter, but still higher than the 36 in the year-ago period.
Transaction value fell by 26.6 per cent to S$317.1 million from S$432.3 million in Q2, a Huttons report published on Friday (Nov 10) showed.
Both the volume and value of shophouse deals in this year’s July-to-September period were a far cry from the sector’s recent peak in 2021.
That year, 73 transactions were recorded in the second quarter and S$606 million worth of shophouse sales were chalked up in the fourth quarter, according to an earlier report from PropNex Realty.
In September 2023, there were just eight transactions recorded, down from 19 in the previous month.
Market watchers said that the heightened scrutiny and customer due-diligence checks – which came after 10 foreign nationals were rounded up in August – have dampened demand from legitimate buyers.
Prohibition of disposal orders were issued for 152 properties; these included 94 residential properties, 53 commercial properties and five industrial properties.
The Business Times (BT) understands the commercial properties include offices and shophouses, but the number of properties in each sub-category has not been publicly disclosed.
One of the 10 accused persons, Su Jianfeng, is linked to a deal involving a freehold shophouse at 28 Keong Saik Road, which is held in the name of a company.
Alan Cheong, Savills Singapore’s executive director of research and consultancy, said: “The Aug 15 money laundering dragnet removed a source of demand from that group of buyers.
“Foreign buyers with legitimate sources of funds may be concerned about how they may be construed in the light of such a major case. Some may also be standing on the sidelines waiting for a better deal.”
Richard Tan, founder of PropNex Shophouse Elites, said that he observed a decline in foreign buyers in Q3, but his team has been closing more deals since October.
He noted that while there is still demand for shophouses priced below S$15 million, he has observed weakness in higher-priced shophouses because there are fewer buyers for this category. Foreign buyers may have taken a wait-and-see approach, he added.
But Lee Nai Jia, head of real estate intelligence, data and software solutions at PropertyGuru Group, said that there could have been a variety of factors that led to the recent decline in shophouse deals.
He explained: “High property prices, in combination with an uncertain economic forecast and a climate of rising interest rates, may be making potential buyers hesitant to engage in such significant investments at this time.
“Nevertheless, while intensified regulatory checks and enhanced due-diligence measures may decelerate sales activity in the short term, it is plausible to consider this decline as a temporary fluctuation.”
Top shophouse transactions in Q3 included a freehold three-storey shophouse in Cheong Chin Nam Road with a land area of 11,947 square feet (sq ft), which sold for S$41 million in September, and a row of three adjoining two-storey freehold shophouses along Jalan Besar with a land area of 6,378 sq ft, which sold for S$38.5 million.
BT reported that the Jalan Besar shophouses were bought by Crescendas Group chairman Lawrence Leow and his family.
In the last quarter, shophouses in Ann Siang Road with a total land area of 1,446 sq ft were said to have been sold for S$32 million to a Singapore vehicle of a company incorporated in Switzerland.
District 8 was the most popular district among investors, due to its more affordable quantum and city fringe location; it accounted for about a quarter of transactions in Q3.
Median shophouse rentals eased by 3.9 per cent to S$5.97 psf per month in Q3, after having risen for seven straight quarters from Q4 2021.
PropertyGuru’s Lee noted: “Rents may have peaked due to increased tenant resistance towards higher rents, and are likely to remain stable moving forward.”
Transaction volumes, meanwhile, are expected to remain thin and prices to stay flattish. Shophouse owners are not selling, even if they own multiple shophouses, said PropNex’s Tan. “Even if they sell, it’s not worth it for them to buy other assets when they will have to pay Additional Buyer’s Stamp Duty (ABSD). There are so many uses for shophouses which can be converted to gyms, hostels, co-living spaces and restaurants.”
Wong Xian Yang, Cushman & Wakefield’s head of research for Singapore and South-east Asia, said: “Shophouse owners tend to hold for the long term and are unwilling to sell unless the price is attractive, while not all buyers are willing to pay top dollar for shophouses given the current interest rate environment and other higher-yielding investment alternatives.”
Lee of PropertyGuru expects prices to hold steady due to a reduction in the number of listings. “This contraction in available properties could balance the market, preventing significant price fluctuations despite a slower transaction velocity.”
The supply of shophouses is limited, with about 6,500 with conservation status in Singapore.
The shophouse market surged to a recent peak in 2021, with S$1.9 billion in sales recorded, data from Knight Frank showed.
For the first nine months of 2023, the volume of shophouse sales came to just under 120 deals worth about S$1.1 billion. This was down from the 155 deals struck worth S$1.3 billion in the year-ago period.
Wong said that while shophouse prices could continue to rise next year owing to limited supply, this would be at a moderate pace, as current demand drivers remain intact and investors do not need to pay ABSD for shophouses designated for commercial use.
https://www.businesstimes.com.sg/property/singapores-once-hot-shophouse-market-cools-after-money-laundering-bust
Nov 10, 2023
FEWER shophouses changed hands in the third quarter of 2023, as foreign buyers take a breather following the S$2.8 billion money laundering crackdown in August.
There were 37 shophouses sold in Q3, based on data from the Urban Redevelopment Authority compiled by Huttons Asia. This was some 21.3 per cent lower than in the previous quarter, but still higher than the 36 in the year-ago period.
Transaction value fell by 26.6 per cent to S$317.1 million from S$432.3 million in Q2, a Huttons report published on Friday (Nov 10) showed.
Both the volume and value of shophouse deals in this year’s July-to-September period were a far cry from the sector’s recent peak in 2021.
That year, 73 transactions were recorded in the second quarter and S$606 million worth of shophouse sales were chalked up in the fourth quarter, according to an earlier report from PropNex Realty.
In September 2023, there were just eight transactions recorded, down from 19 in the previous month.
Market watchers said that the heightened scrutiny and customer due-diligence checks – which came after 10 foreign nationals were rounded up in August – have dampened demand from legitimate buyers.
Prohibition of disposal orders were issued for 152 properties; these included 94 residential properties, 53 commercial properties and five industrial properties.
The Business Times (BT) understands the commercial properties include offices and shophouses, but the number of properties in each sub-category has not been publicly disclosed.
One of the 10 accused persons, Su Jianfeng, is linked to a deal involving a freehold shophouse at 28 Keong Saik Road, which is held in the name of a company.
Alan Cheong, Savills Singapore’s executive director of research and consultancy, said: “The Aug 15 money laundering dragnet removed a source of demand from that group of buyers.
“Foreign buyers with legitimate sources of funds may be concerned about how they may be construed in the light of such a major case. Some may also be standing on the sidelines waiting for a better deal.”
Richard Tan, founder of PropNex Shophouse Elites, said that he observed a decline in foreign buyers in Q3, but his team has been closing more deals since October.
He noted that while there is still demand for shophouses priced below S$15 million, he has observed weakness in higher-priced shophouses because there are fewer buyers for this category. Foreign buyers may have taken a wait-and-see approach, he added.
But Lee Nai Jia, head of real estate intelligence, data and software solutions at PropertyGuru Group, said that there could have been a variety of factors that led to the recent decline in shophouse deals.
He explained: “High property prices, in combination with an uncertain economic forecast and a climate of rising interest rates, may be making potential buyers hesitant to engage in such significant investments at this time.
“Nevertheless, while intensified regulatory checks and enhanced due-diligence measures may decelerate sales activity in the short term, it is plausible to consider this decline as a temporary fluctuation.”
Top shophouse transactions in Q3 included a freehold three-storey shophouse in Cheong Chin Nam Road with a land area of 11,947 square feet (sq ft), which sold for S$41 million in September, and a row of three adjoining two-storey freehold shophouses along Jalan Besar with a land area of 6,378 sq ft, which sold for S$38.5 million.
BT reported that the Jalan Besar shophouses were bought by Crescendas Group chairman Lawrence Leow and his family.
In the last quarter, shophouses in Ann Siang Road with a total land area of 1,446 sq ft were said to have been sold for S$32 million to a Singapore vehicle of a company incorporated in Switzerland.
District 8 was the most popular district among investors, due to its more affordable quantum and city fringe location; it accounted for about a quarter of transactions in Q3.
Median shophouse rentals eased by 3.9 per cent to S$5.97 psf per month in Q3, after having risen for seven straight quarters from Q4 2021.
PropertyGuru’s Lee noted: “Rents may have peaked due to increased tenant resistance towards higher rents, and are likely to remain stable moving forward.”
Transaction volumes, meanwhile, are expected to remain thin and prices to stay flattish. Shophouse owners are not selling, even if they own multiple shophouses, said PropNex’s Tan. “Even if they sell, it’s not worth it for them to buy other assets when they will have to pay Additional Buyer’s Stamp Duty (ABSD). There are so many uses for shophouses which can be converted to gyms, hostels, co-living spaces and restaurants.”
Wong Xian Yang, Cushman & Wakefield’s head of research for Singapore and South-east Asia, said: “Shophouse owners tend to hold for the long term and are unwilling to sell unless the price is attractive, while not all buyers are willing to pay top dollar for shophouses given the current interest rate environment and other higher-yielding investment alternatives.”
Lee of PropertyGuru expects prices to hold steady due to a reduction in the number of listings. “This contraction in available properties could balance the market, preventing significant price fluctuations despite a slower transaction velocity.”
The supply of shophouses is limited, with about 6,500 with conservation status in Singapore.
The shophouse market surged to a recent peak in 2021, with S$1.9 billion in sales recorded, data from Knight Frank showed.
For the first nine months of 2023, the volume of shophouse sales came to just under 120 deals worth about S$1.1 billion. This was down from the 155 deals struck worth S$1.3 billion in the year-ago period.
Wong said that while shophouse prices could continue to rise next year owing to limited supply, this would be at a moderate pace, as current demand drivers remain intact and investors do not need to pay ABSD for shophouses designated for commercial use.
https://www.businesstimes.com.sg/property/singapores-once-hot-shophouse-market-cools-after-money-laundering-bust