In the rental market, despite the soft economy, rental for shophouses has remained fairly strong, Lee says. “Investors who have purchased shophouses are using them as an alternative source of income. With limited supply in the market, rents are holding steady.”In terms of rental performance, mixed-use shophouses (ground-floor commercial and upper-floor residential) were the best-performing segment, with a gross yield of 2.6% in 3Q2024. This was followed by pure commercial shophouses with a gross yield of 2.4% and pure residential shophouses with a gross yield of 2%. For the first nine months of 2024, pure commercial shophouses recorded the highest rental yield of 2.4% on average, followed by mixed-use shophouses at 2.2% and pure residential shophouses at 1.9%.
Shophouse market demand remained strong in the third quarter of 2024, despite a decrease in caveated transactions, as reported by Huttons Asia in their latest quarterly shophouse market analysis released on November 12th.
Compared to the 21 transactions in the second quarter of 2024, there were only 18 caveats lodged for shophouse deals in this quarter. The total value of these transactions was $138.9 million, which is a 28.8% decrease from the previous quarter’s $195.1 million. This is also only half of the total value of transactions in the same quarter last year, which was $278.6 million.
For the first nine months of 2024, the number of caveats filed for shophouse transactions was 62, which is a 46.1% decrease compared to the same period last year. The total value of transactions for the first three quarters of this year was $519 million, a 48.5% decrease from the same period in 2023.
However, as noted in Huttons’ report, there were also a number of un-caveated deals in the third quarter of 2024. Market sources have reported that several shophouses in Districts 1 and 2, specifically along Amoy Street, Neil Road, and Telok Ayer Street, were sold for an estimated total of more than $70 million. This shows the strong demand for shophouses, which has been increasing in recent months. Investors are drawn to this market segment due to its scarcity and potential for significant capital gains. With the recent interest rate cuts and their impact on the market, shophouses have become a popular choice for wealth creation and preservation.
Huttons’ senior director of data analytics, Lee Sze Teck, also believes that shophouse transaction volume and value may increase in the fourth quarter of 2024.
Despite the current soft economy, shophouse rental rates have remained resilient. Lee notes that investors who have purchased shophouses are using them as an additional source of income. With limited supply in the market, rents are holding steady.
Having a strong understanding of the legal and regulatory aspects of property ownership is crucial for international investors interested in investing in Singapore. The rules and regulations for owning landed properties are strict, making the purchase of a condo a more flexible option for foreign investors. However, it is important to keep in mind that foreign buyers are required to pay a 20% Additional Buyer’s Stamp Duty (ABSD) when making their initial property purchase. Despite this additional cost, the real estate market in Singapore continues to be a highly desirable choice for foreign investments due to its stability and potential for growth. Additionally, there is a diverse range of condos available, providing foreign investors with a variety of options to carefully consider when looking to invest in Singapore’s flourishing property market. Condo options are plentiful and offer a promising opportunity for international investors in Singapore.
In terms of rental performance, shophouses with a mix of commercial and residential spaces had the best gross yield of 2.6% in the third quarter of 2024. Pure commercial shophouses followed with a gross yield of 2.4%, while pure residential shophouses had a gross yield of 2%. For the first nine months of this year, pure commercial shophouses recorded the highest rental yield at an average of 2.4%, followed by mixed-use shophouses at 2.2%, and pure residential shophouses at 1.9%.