These were the top 5 shophouse deals in Singapore in H2 2022

The total shophouse transaction value declined 35.6% to S$625.2m in the same period.

While the shophouse market continued to draw interest in the second half of the 2022, a Knight Frank report said sentiment turned conservative and sales activity contracted, a stark contrast from the record-breaking performance reported every six months between H1 2021 and H1 2022. 

Between July and December 2022, a total of 67 shophouses changed hands for some S$625.2 million, representing a 35.6% and 38.7% decline in transaction value on a half-yearly and y-o-y basis respectively. 

Here’s more from Knight Frank:

For the whole of 2022, there were a total of 187 shophouse transactions reflecting a sales value of S$1.6 billion, with most of the activity having taken place in the first half of the year.

With the recent surge in interest rates, demand has dampened. As interest rates surpassed the yield from recurring shophouse income, institutional investors began to shy away from the asset class. However, this leaves the road open to private wealth that is not as dependent on debt financing.

Family offices and individuals are expected to form the bulk of the purchasers, acquiring in strategic locations, adding value through refurbishment, changing up the tenancy types to trendy occupiers, and increasing rents, as private capital investors believe in the long-term forward-looking appreciation of shophouses in affluent Singapore. 

Out of the shophouses that exchanged hands in H2 2022, 80.6%, or 54 units, were freehold. This was about half of the sales volume registered half-yearly since 2021, where 102 to 95 units were transacted within each period. As such, the sales volume of freehold shophouses in H2 2022 amounted to S$469.9 million, with a corresponding average price of S$4,802 psf on land (Exhibit 1). 

This was similar in the leasehold shophouse segment. In H2 2022, 13 transactions were recorded, bringing the total sales value to S$155.3 million, or an average price of S$4,275 psf (on land). This was 34.6% lower than the S$237.6 million registered in the first half of the year, and almost two-thirds of the S$242.2 million registered in H2 2021. 

Despite the deceleration in sales, notable deals were sealed that included the acquisition of 11 shophouses along Lavender Street by Hafary Holdings earlier in July at a price of around S$71.3 million, where the group plans to establish its new flagship store. 

Amid the general slowdown in the shophouse market, District 8 remained a hotspot. Between July and December 2022, 26 shophouses exchanged hands for a total of about S$182.5 million, in stark contrast to every other district where there were less than ten transactions each during the same period. The purchase of a row of five conservation shophouses along Jalan Besar by 8M Real Estate for S$40 million in late September led the deals in District 8, among the top five deals in H2 2022 (Exhibit 2).

Additionally, among the 26 transactions in District 8, a shophouse unit at 35 Rowell Road was sold for S$4.9 million in October 2022, about 21.0% higher than the preceding sale a mere three months back in June when the same unit swapped hands for just under S$4.1 million. Nonetheless, subsequent sales within months of each other remain more the exception than the rule. For most shophouse owners/ investors, the longer the unit is held the greater the returns over time where a holding period spanning decades typically results in more than 100% returns.