Singapore shophouse sales hit record S$1.9b in 2021

SHOPHOUSE sales in Singapore hit an all-time high value of S$1.9 billion in 2021, up by approximately S$1 billion from the year before, according to Knight Frank’s latest market update on Jan 24.

The real estate consultancy attributed 2021’s record sales value to bullish investor sentiment, which came on the back of an economic rebound.

While total volume of shophouse sales in 2021 amounted to 244 transactions, which was lower than the record 291 sales in 2012, the latest full-year value surpassed that of 2012 as more than half of the shophouse deals exceeded S$5 million each.

Freehold shophouse sales in H1 2021 totalled to a record 99 transactions. Combined with the 95 transactions in H2 2021, the full year saw 194 transactions that amounted to S$1.5 billion, up from 128 transactions for a total of S$789.6 million in 2020.

Likewise, leasehold shophouses also saw a surge in sales volume from 17 in 2020 to 50 in 2021, with about 60 per cent of leasehold transactions located at prime District 1 and 2. Knight Frank credited this to the available leasehold inventory in the market and the “allure of capital appreciation”.

The average unit price for freehold shophouses grew 19.6 per cent year on year to S$4,414 per square feet (psf) on land in 2021, while the average unit price for leasehold shophouses averaged to S$5,100 on land in 2021.

Leasehold sales were mostly located in the prime Districts 1 and 2 and therefore had prices about 15.5 per cent higher then freehold sales, which were mostly located in Districts 8, 14 or 15.

Knight Frank noted that the more popular and prime Districts 1 and 2 drew higher price premiums and attracted investors as these areas are largely gentrified. In the consultancy’s view, gentrification is a key investment engine for heritage shophouses in modern Singapore.

More affordable areas such as Little India in District 8 are in the process of gentrification, and will therefore also attract investors who see potential for the district’s transformation in the longer term, Knight Frank added.

Several notable bulk sales or en bloc deals contributed to the overall shophouse sales value for 2021. The biggest transaction of the year was the collective sale of 3 adjoining mixed-use redevelopment sites at Bukit Timah/Duke’s Road for S$53.9 million.

On a psf basis, the largest transaction was a pair of shophouses at 202/204 South Bridge Road, which sold for S$35 million or S$14,255 psf on land area. The property sold for almost 10 times its initial price and achieved the highest rate of return in terms of property gains for shophouses in H2 2021, after being held for more than 15 years.

Knight Frank said 2021 was “exceptional” for the shophouse market with investors developing greater interest in shophouses as a defensive asset class. More spillover demand can be anticipated as commercially zoned shophouses will not be affected by the government’s latest cooling measures, it added.

“Steady gentrification in shophouse districts will also continue to fuel demand, and it is expected that the total sales value for the shophouse market could reach S$2.0 billion in 2022. Especially so, with the moderate spillover effects from investors in the residential sector,” said the consultancy.