Following a significant surge in purchasing activity at the end of last year, continued interest from overseas purchasers, family offices, and institutional investors has maintained demand for shophouses in the first quarter of 2021.
51 transactions totaling S$328.3 million were registered in the first quarter of this year, as per data gathered on April 6.
Despite the fact that this is less than the fourth quarter of 2020’s results, which saw 57 transactions for S$462.8 million, experts said it is still a strong performance that reflects steady demand.
According to a research by Knight Frank, sales in the last quarter of last year had reached pre-pandemic levels due to pent-up demand, cheaper borrowing rates, and strong market liquidity.
According to Mr. Clemence Lee, senior director of capital markets for Singapore at CBRE, investors are still eager to invest in shophouses, which are viewed as defensive assets that preserve value even during a slump.
In particular, Mr. Lee noted that demand from purchasers in Malaysia, Hong Kong, and China has been “becoming strong” since it started to increase in the middle of last year.
He noted that a number of significant recent deals, including a S$21.5 million agreement for 22 and 23 Mosque Street and a S$15.7 million sale for 81 South Bridge Road, were carried out by foreigners.
According to Mr. Lee, “a strong and stable Singapore currency is also one of their major considerations, of which investing in shophouses in Singapore will act as a hedge against currency risks in their home country.” Shophouses are attractive because they are defensive asset types that offer stability in uncertain times.
He continued, “Foreign purchasers often seek for shophouses since this asset provides them with capital preservation and appreciation.
According to Mr. Steven Tan, senior director of investment services at Colliers, other sources of demand include family offices, funds, and investors in co-living facilities.
Private wealth management companies known as family offices cater to extremely wealthy households.
Investors are confident about a medium- to long-term market outlook since the COVID-19 immunization program and the number of community illnesses are under control. Investors now recognize that it is wise to invest before prices start to rise, he added.
The fact that shophouses do not necessitate additional buyer’s stamp taxes makes them “an economical entry point” for overseas investors wishing to dabble in Singapore real estate, according to Mr. Tan.
The majority of purchasers are family offices, investors, and some overseas buyers, according to Ms. Mary Sai, an executive director at Knight Frank Singapore. However, she has noticed a “increasing presence and interest” from family offices in their inquiries and viewings.
Like Mr. Tan, Ms. Sai linked the general interest in shophouse improvements to the expansion of vaccination programs and the upbeat economic climate.
As more tenants and their workers return to the workplace as a result of a loosening of COVID-19 restrictions in the workplace, she continued, falling vacancy rates are also encouraging investors.
The experts predicted that shophouses in the central business area will remain the most common.
However, Mr. Lee of CBRE noted that the epidemic has increased demand in city peripheral locations like Jalan Besar, Geylang, and Joo Chiat.
According to him, suburban shophouses are often better fortified because they primarily serve the neighborhood.
The likelihood that consumers would visit the stores in neighborhood centers on days when they work from home is likely to increase as more organizations implement hybrid working models in the future, according to the study.
He added that these city perimeter shophouses offer somewhat greater yields while requiring less capital than those in central locations.
Since of this, family offices find them appealing because they “prefer to diversify throughout this era and not to put all their eggs in one basket.”
The demand for shophouses would probably increase as more family offices are established in Singapore, according to Ms. Tricia Song, director of Collier’s research team, as a result of the region’s growing prosperity.
The limited supply of such shophouses in Singapore, the researchers continued, is a significant feature that has historically characterized the market and will continue to keep it lively.