Overview of Singapore's Shophouse Market

Shophouses in Singapore, significant for their historical and architectural value, are a crucial part of the country's urban planning. Constructed during the 1800s and 1900s, these buildings have been renovated for modern uses while preserving their distinct architecture. Approximately 6,500 conserved shophouses exist in Singapore, mainly located in historic districts such as Balestier, Beach Road, Geylang, Boat Quay, Chinatown, Kampong Glam, and Little India. These areas offer various uses, from commercial and residential to mixed-use, making shophouses valuable assets.

Impact of Tourism on Shophouse Demand

Singapore's tourism sector showed a strong recovery in 2023, with international visitor arrivals reaching 13.6 million, about 71% of 2019 levels. The hotel industry's performance, with Average Room Rate (ARR) and Revenue per Available Room (RevPAR) surpassing 2019 levels, reflects robust tourism activity. In Q1 2024, international visitor arrivals totaled 4.35 million, a 25.6% increase from the previous quarter. Key markets driving this growth included China, Indonesia, and Malaysia.

Shophouse Transactions and Values

The demand for conservation shophouses boosted the number of transactions from 14 units in 4Q2023 to 21 units in 1Q2024. The total value of these transactions increased by 67.9%, from $107.6 million to $180.7 million. Notable transactions included the sale of a freehold shophouse at 31 Pagoda Street for $19.0 million and three adjoining shophouses in Geylang for $18.7 million.

Rental Market Dynamics

In 1Q2024, the volume of shophouse rental transactions moderated by 4.7% from the previous quarter, totaling approximately 864 transactions. However, the total leasing value increased marginally by 1.1% to $9.7 million, the highest quarterly rental value since 1Q2023. Median monthly rentals for shophouse transactions increased to $6.43 psf in 1Q2024 from $6.36 psf in 4Q2023.

Future Outlook and Strategic Shifts

The demand for shophouses is expected to remain strong, driven by positive tourism trends and the implementation of mutual 30-day visa-free travel between China and Singapore. International visitor arrivals are projected to reach 15 to 16 million in 2024, with tourism receipts estimated at $26.0 to $27.5 billion. The restoration of flight connectivity and positive travel demand trends provide a stable foundation for growth.

Additionally, property cooling measures introduced in April 2023, such as increased Additional Buyer's Stamp Duty (ABSD) rates, have made commercial properties like shophouses more attractive investments. Shophouses that are entirely commercial are not subject to ABSD, benefiting foreign investors and Singaporeans who already own property.

Conclusion

The report highlights the resilience and attractiveness of Singapore's shophouse market. Despite potential global economic headwinds, the positive economic recovery and robust tourism sector are expected to sustain demand for shophouses. Investors, including family offices, are likely to continue considering shophouses as viable investment options. The unique historical and architectural value of shophouses, combined with their limited supply, ensures their continued appeal in Singapore's real estate market.

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Prepared By: 

Mohan Sandrasegeran 

Head of Research & Data Analytics