Shophouse market activity slows following anti-money laundering crackdown: Huttons Asia

37 shophouse transactions occurred in 3Q2023, 21.3% lower q-o-q (Picture: Samuel Isaac Chua/The Edge Singapore)

SINGAPORE (EDGEPROP) - Activity in the shophouse market contracted after a crackdown in August that resulted in the arrest of 10 foreigners suspected of money laundering. In a November research report by Huttons Asia, the consultancy observes that only eight shophouse transactions occurred in September, less than half the transactions recorded the month prior.

This brings 3Q2023 shophouse transactions to 37, 21.3% lower q–o-q compared to the previous quarter. Total shophouse transaction value fell 26.6% q-o-q from $432.3 million in 2Q2023 to $317.1 million in 3Q2023.

In the first nine months of 2023, Huttons estimates 117 shophouses have changed hands, 24.5% lower compared to the same period the previous year. Transacted value totalled $1.1 billion between January and September this year, compared to $1.3 billion across the same period last year.

Among the transactions that occurred in 3Q2023, nearly a quarter were in District 8. Lee Sze Teck, senior director of data analytics at Huttons Asia, notes that the district remains the most popular among shophouse investors due to its city-fringe location and more affordable price quantum. He adds that “999-year leasehold and freehold shophouses remained the preferred choice among investors for wealth preservation".

The largest shophouse deal in 3Q2023 was the purchase of three freehold Jalan Besar shophouses for $38.5 million. The buyer is understood to be Crescendas Group chairman Lawrence Leow and his family.

The second-largest shophouse transaction last quarter was the sale of 999-year leasehold shophouses at 5, 5A and 5B Ann Siang Road for $32 million. The buyer is said to be the Singapore vehicle of a Switzerland-incorporated company.

Other notable transactions last quarter include the sale of 120 Tanjong Pagar Road for $16.2 million, and the sale of 41 Mosque Street for $15.6 million.

Meanwhile, median rents of shophouses fell by 3.9% q-o-q in 3Q2023 to $7.04 psf per month. According to Lee, rental volume stayed stable, indicating steady demand from tenants.

Looking ahead, Lee believes the shophouse market may stay subdued in the last quarter of the year. This comes on the back of an Oct 2 circular released by URA announcing a revised list of locations where additional eating houses in shophouses will not be allowed.

“The revised list may impact shophouses whose owners are considering renting out the ground-floor space to F&B operators to increase the yield before selling. Investors may possibly shun shophouses that do not have permission to operate F&B outlets,” Lee explains.

Nonetheless, he sees shophouses staying as a top choice among investors for wealth preservation.

In the rental market, Lee says shophouse rents may have peaked, given increased tenant resistance towards higher rents. He expects rents to “remain stable” moving forward.