Sales Volume and Prices Decline, But District 8 Remains a Stronghold
In the second half of 2022, Singapore’s shophouse sales plummeted to S$625.6 million, marking a 35.6% decline from the first half of the year, as rising interest rates caused investor caution. This represents a 38.7% year-on-year drop, in sharp contrast to the record-breaking sales figures seen between H1 2021 and H1 2022, according to a market update from Knight Frank on Wednesday (Jan 25).
During the second half of 2022, 67 shophouse transactions took place, with freehold properties making up 80.6% of the sales at 54 transactions. In total, 187 transactions occurred in 2022, amounting to S$1.6 billion, a decrease from 2021’s peak of S$1.9 billion. As interest rates began to surpass the yields from shophouse income, institutional investors started to retreat from the asset class.
Sales of leasehold shophouses also saw a downturn, with just 13 transactions worth S$155.3 million in H2 2022. This was a 34.6% drop from the first half of the year and nearly two-thirds lower than H2 2021’s S$242.2 million.
In terms of pricing, the average unit price for leasehold shophouses in H2 2022 was S$4,275 per square foot (psf), reflecting a 17% decrease from the previous half-year. Freehold shophouses were priced at an average of S$4,802 psf on land.
Despite the overall slowdown, District 8 continued to attract significant buyer interest, with 26 transactions totalling S$182.5 million in the second half of 2022. This stood out starkly compared to other districts, which saw fewer than 10 transactions each during the same period. Knight Frank attributed this to the area’s affordability compared to Districts 1 and 2, bolstered by increased tourist activity and gentrification.
One of the most notable sales in District 8 was a unit at 35 Rowell Road, sold for S$4.9 million in October 2022—21% higher than its previous sale in June. The largest transaction during the period was Lavender Place at 161 Lavender Street, a row of 11 shophouses purchased for S$71.3 million by tile specialist Hafary Holdings. The priciest unit on a psf basis was 11 Bali Lane in the Kampong Glam Conservation Area, sold for S$23 million or S$13,821 psf.
Knight Frank suggests that demand for shophouses will remain strong among private wealth sources, including high-net-worth individuals and family offices, especially as travel demand rebounds and China’s travel restrictions ease. However, with the growing caution in the market, the consultancy forecasts that 2023 will see more moderate sales figures, with totals likely to range between S$1.3 billion and S$1.5 billion, a significant reduction from the peaks of 2021 and 2022.
The most profitable deal in H2 2022 was a 724 sq ft unit at 31 Bussorah Street, sold for S$3.5 million after the seller had held it for 20 years, yielding a 900% profit. Similarly, a 911 sq ft unit at 82 Dunlop Street sold for S$4.1 million, marking a 478.6% profit for the seller who had owned the property for two decades.
