THE value of shophouse transactions last year reached S$655.6 million, up 8 per cent from S$606.2 million in the previous year. However the number of transactions eased in 2015; a total of 103 caveats were lodged last year - down from 112 in 2014, suggesting bigger-ticket shophouses changed hands last year.
Some market watchers told The Business Times that there has been heightened interest for this property asset class from ultra high net worth investors and family funds, some prepared to accept low entry yields of just 2-3 per cent (on a gross basis) with an eye to capital appreciation in the medium to long term.
Sammi Lim, associate director, investment properties, at CBRE, expects the value and volume of shophouse deals to remain stable this year, similar to 2014 and 2015 levels - chiefly because investors are in it for the long haul. "Buyers will expect higher entry yields as they remain prudent in their purchases against the backdrop of impending interest rate rises."
The pool of serious investors exploring this asset class is set to widen further this year, with the entry of more boutique institutional funds exploring shophouses to add to their entire portfolio, Ms Lim added.
Analysts note that despite a recent pick-up in interest in the shophouse market, both the value and volume of shophouse transactions have dropped drastically - following the introduction of the total debt servicing ratio (TDSR) framework in late-June 2013. CBRE's analysis shows that between Q1 2012 and Q2 2013, the number of caveats lodged for shophouse deals ranged from 61 to 84 per quarter. This has fallen to 22-33 deals per quarter since Q3 2013.
Over the same period, the value of transactions per quarter has also slipped from S$287-464 million pre-TDSR to S$124-204 million post-TDSR.
Among the shophouse transactions in Q4 last year are a row of three adjoining freehold shophouses at 42, 44 and 46 Joo Chiat Road, which sold for S$23 million. The price translates to S$1,552 per square foot on built-up area.
Located opposite Joo Chiat Complex, the three shophouses have two storeys and an attic in front, and four storeys and an attic at the back.
The properties are located within the Joo Chiat Conservation Area and have a land area of about 4,992 square feet and a gross floor area (GFA) of about 14,820 sq ft. The 3.0 plot ratio (ratio of maximum GFA to land area) allotted for the commercial-zoned site is nearly fully utilised. However, there is scope for reconfiguration work to achieve a higher proportion of usable area.
The three shophouses are being sold by a hardware company that currently occupies the premises for its business. The buyer is a Singapore-incorporated company that is believed to be a family office for three Chinese citizens residing in Hong Kong. They are understood to own other shophouse and strata commercial properties in Singapore. The seller is understood to have leased back the property from the new owner.
When contacted, CBRE confirmed it brokered the deal.
In the Tanjong Pagar Conservation Area, a corner shophouse at Craig Road changed hands last month for S$12.5 million, which works out to S$2,445 psf based on the built-up area of 5,113 sq ft. The three-storey property is on a site with a balance lease term of about 72 years. The property is being sold by a company whose shareholders include Clifton Partners; the buyer is a vehicle controlled by Spanish tycoon Ricardo Portabella Peralta, who last year also picked up two shophouse properties in the Duxton area for a total of S$13.7 million in addition to buying a pair of adjoining shophouses along Telok Ayer Street for S$18.2 million.
A pair of adjacent shophouses along Haji Lane in the Kampong Glam Conservation Area were also sold last month at S$3.425 million each.
According to Ms Lim of CBRE, the buyer-seller price gap has narrowed as sellers are more accepting of realistic pricing.
Historical Land director Simon Monteiro suggested the conservation shophouse market last year may have benefited from the SG50 fervour rubbing on to some investors, raising their interest in heritage properties. "With the 200th anniversary of Singapore's founding just a few years away, in 2019 - this heritage fervour may continue," Mr Monteiro reckons.
Many high net worth clients are more keen on putting money into the Singapore commercial segment because the residential market is in the doldrums, he added. Another attraction of shophouses that are on sites which are fully zoned commercial is that they are open to foreign ownership and not subject to the additional buyer's stamp duty.
Mr Monteiro suggests that a shophouse can be more of an emotional buy. "Some properties are trading at just 2-3 per cent gross yield, because a lot of people are eyeing capital appreciation - as seen in the past five to 10 years."
This trend will continue, he argues.
Source; Business Times, 7 Jan 2016