Fewer commercial shophouse sales in 1Q2023, but shophouse rental market remains brisk: PropNex
The volume of commercial shophouse sales in Singapore saw a moderation in 1Q2023, despite persistent interest from investors such as family offices, funds and high-net-worth individuals. According to a 1Q2023 report by PropNex Research, referring to caveat data, only 28 shophouses were sold during the quarter, down from 35 deals recorded in 4Q2022 and representing a 46% drop from 1Q2022.
The total transaction value of shophouse deals in 1Q2023 was $278 million, representing the lowest quarterly tally since 3Q2020. This figure was down by 11.7% from the previous quarter, and 40.6% from 1Q2022. Of the 28 shophouse sales last quarter, more than 80% were over $5 million.
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District 8, which includes the Little India and Jalan Besar areas, saw the most shophouse transactions, with seven units soldfor a total transaction value of $113 million, accounting for 41% of the total shophouse sales value in 1Q2023.
In comparison, activity in prime Districts 1 and 2 was more muted, with only three and two shophouses sold respectively. The lower number of deals in these districts is attributed to a lower supply of shophouses available for sale.
Unit price on land area was uneven across districts in 1Q2023, partly because of the lower volume of caveated transactions. In addition, market observations suggest that a number of deals, particularly those in prime Districts 1 and 2, were not caveated, mostly consisting of deals made by foreigners and entities.
Freehold and 999-year leasehold shophouses in Districts 1 and 2 saw the average unit price on land area in 1Q2023 drop by 20% q-o-q. In contrast, psf prices for Districts 7 and 8 shophouses based on land area went up by 8% q-o-q in 1Q2023.
In terms of the shophouse rental sector, activity remained brisk in 1Q2023 with 886 rental contracts signed, a marginal decrease from the 904 contracts in 4Q2022. The total rental value stood at a record high of $9.54 million, while the median rentals climbed to $5.98 psf per month.
Given the higher level of supply and more affordable entry prices in fringes districts, PropNex expects interest in commercial shophouses to remain keen, though it could be tempered by escalating interest rates. Prices are likely to remain resilient in 2023, given the limited stocks and healthy demand. Furthermore, shophouse rents are expected to rise further, supported by the recovery of the tourism and retail industries.