Once-hot shophouses market cools after money launderer bust

Richard Tan is the founder of PropNex Shophouse Elites. He said that although he saw a decline in foreign purchases in Q3, his company has been able to close more deals since last October.

He noted that while shophouses under S$15million are still in demand, the price of higher priced shops has fallen because there are fewer purchasers. He noted that foreign buyers may have been on a waiting-and seeing approach.

In the third-quarter of 2023, foreign buyers have taken a breather after the S$2.8bn anti-money laundering crackdown.

Median rents for shophouses fell by 3.9 % to S$5.97psf/month in Q3, following a seven-quarter rise since Q4 2020.

Huttons Asia’s compilation of data from Urban Redevelopment Authority shows that 37 shophouses were purchased in Q3. This is a reduction of 21.3 percent from the previous period, but it’s still higher than last year’s 36.

After 10 foreign nationals in August were arrested, market watchers claim that due diligence and increased scrutiny has reduced demand.

Huttons reported published on November 10 showed that Q2 transaction values fell by 26.6%, from S$432.3 to S$317.1.

Volume and value of deals for shophouses in this year’s period from July to September were far less than 2021’s peak.

In that same year, shophouse sales reached S$606m in the fourth-quarter and 73 transactions were registered in the second-quarter.

In September, 2023, just eight transactions were recorded – down from 19 the previous month.

A total of 152 properties were subject to prohibition orders. These properties included 94 residences, 53 businesses and five industries.

Su Jianfeng one of the accused is tied to a business deal concerning a freehold property at 28 Keong Saik Road which was held in the company’s name.

While transaction volumes should remain thin, prices are expected stay flat. Shophouse owners will not sell, regardless of whether they own more than one shophouse. There are many ways to use shophouses. They can become gyms, hotels, co-living rooms, and restaurants.

Shophouse owners will hold on to their properties for the long run and will only sell at a high price if the offer is very attractive.

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It is possible to think of this drop as a temporary variation, even though the increased regulation and due diligence checks may have slowed down sales temporarily.

Top shophouse deals in Q3 include a freehold 3-storey shophouse with a lands area of 11,947 square foot (sqft), sold for S$41million in September. Also, a row adjacent to two-storey adjoining shophouses on Jalan Besar that had a lands area of 6,378sqft sold for S$38.5million.

In the third quarter, a Singapore vehicle belonging to a company registered in Switzerland purchased shophouses located in Ann Siang Road. They had a total of 1,446 ft2 of land.

Lee Nai Jia from PropertyGuru Group said that the recent decline of shophouse deals could be due a wide range of reasons.

District 8 is the most popular area for investors because of its location at the edge of city and lower cost. It was responsible for about one-quarter (25%) transactions in Q3.

Rents may be at their peak due to increased tenant opposition to higher rents. They are likely going to remain stable.

Singapore only has about 6,500 shophouses with conservation status.

Knight Frank reported that the market for shophouses surged in 2021 to its recent high, with S$1.9 Billion in sales.

The first nine months in 2023 saw a volume of sales of about S$1.1bn. This was a drop from the 155 sales worth S$1.3billion in the prior period.

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