http://www.businesstimes.com.sg/prem...teady-20130911

Published September 11, 2013

Shophouse deals slow but prices remain steady

Number of caveats lodged eases from 34 in May to 22 in June and 11 in July

By Kalpana Rashiwala [email protected]


WHILE the volume of shophouse transactions has slowed since the Total Debt Servicing Ratio (TDSR) framework was introduced in late June, prices seem to be holding up for now.

Based on Savills Singapore's analysis of URA Realis caveats data as at Sept 9, the number of caveats lodged for shophouses eased from 34 in May to 22 in June and 11 in July. Only 10 caveats were lodged for shophouse purchases in August, though more caveats for last month's transactions are expected in the next few weeks.

The 21 caveats for July and August totalled $122.4 million. In Q2, there were 74 caveats lodged totalling $449.5 million.

For the first eight months of the year, transactions reached $1.04 billion. The figure for 2012 was $1.38 billion and that for 2011, $1.15 billion.

Between January 2011 and August 2013, companies and Singaporeans have been the most active buyers of shophouses, followed by individual buyers from Malaysia. Over this period, nearly 72 per cent of shophouses acquired by companies were priced at more than $3 million per transaction, while about half of Singaporeans' purchases were in the $1 million-$3 million range

Last month's shophouse transactions included a 999-year-leasehold property in Haji Lane near Bugis MRT Station on land of about 693 square feet which sold for $3.88 million, and a freehold property at Sam Leong Road (near Syed Alwi Road) on 1,523 sq ft of land that changed hands for $5.35 million.

Last week, BT reported that the freehold Hotel 1929 along Keong Saik Road was sold for $35 million.

Steven Ming, deputy managing director of Savills Singapore, said that despite the slower activity in shophouses following the introduction of the TDSR, prices seem to be holding steady. Recent shophouse sales in the CBD area were around $2,200-$2,300 per square foot (psf) of gross floor area (GFA) on average, said Mr Ming.

Ashish Manchharam, regional director of investments at Jones Lang LaSalle (JLL), places recent prices for CBD shophouses at $2,200-$2,500 psf on GFA on average. "This could be around 10-15 per cent more than 12 months ago. The outlook remains positive in light of limited supply of shophouses."

While Savills' Mr Ming reckons that volumes may remain subdued as investors' access to funding has tightened post-TDSR, he believes prices are likely to remain steady given the limited shophouse stock. "In fact, there may be even price upside for unique properties in prime locations - such as those with interesting architecture, high floor-to-ceiling height or with potential for building further floor area."

Steeped in history and often likened to collectors' art pieces, shophouses are likely to remain sought after by wealthy investors. "We're also seeing strong interest from business owners keen to invest in the shophouse market to develop new business concepts. This is particularly so if there is a contiguous row of shophouses with potential to be converted into boutique hotels, high society clubs or even fresh F&B concepts," added Mr Ming.

A few shophouses were put on the market recently.

In the CBD, Nos 35 and 36 North Canal Road, two adjoining four-storey conservation shophouses with unobstructed views of Hong Lim Park, are expected to fetch more than $20 million, said marketing agent Savills. The pair have a combined GFA of around 11,000 sq ft but this could potentially increase to 14,068 sq ft based on the 4.2 plot ratio (ratio of maximum GFA to land area). The additional floor area can be built on top of the fourth level at the rear.

Zoned for commercial use, the properties are on a site with a total land area of nearly 3,350 sq ft and with a balance leasehold tenure of about 34 years. Owned by an overseas investor, the properties are being offered for sale through an expression of interest (EOI) that closes on Oct 10.

Along Tanjong Katong Road, five freehold two-storey shophouses are on offer through an EOI being conducted by JLL closing on Sept 25. The properties are zoned "residential with commercial at the first storey" and have a 3.0 plot ratio. Four-storey extensions are allowed at the rear, providing an opportunity to maximise the GFA.

One shophouse, 362 Tanjong Katong Road, is a corner property at the junction of Wilkinson Road. The other four, at Nos 332-338, are a short distance away; one of the four is the corner junction of Branksome Road. No 362 Tanjong Katong Road, with a land area of 2,026 sq ft and existing GFA of 3,800 sq ft, is priced at $10 million, translating to 3.5 per cent gross yield on existing tenancies. The GFA may be increased to around 6,000 sq ft.

Nos 332-338 Tanjong Katong Road, on 6,216 sq ft of land and with current GFA of 9,888 sq ft, are being sold with vacant possession. They may be developed to a GFA of 18,600 sq ft, with potential for strata unit sales. JLL expects $25 million for the four shophouses.

The properties are being offered together as a portfolio of five shophouses or separately by its owner - a family-owned investment company.

Said Mr Manchharam: "This is a rare opportunity to acquire up to five freehold shophouses with development potential within an established residential location. The Tanjong Katong and East Coast Road area remains popular for niche retail and F&B operators with its eclectic mix of cafes, trendy restaurants and lifestyle outlets."