Investment in Singapore shophouses has stabilised and shows signs of picking up after taking a hit following the introduction of a loan curb in 2013. Total transaction value has been rising in the past two years even though the number of caveats lodged remained fairly steady at just over 100 a year.
Transaction value rose by about 7.6 per cent to $707.07 million last year, from $657.3 million in 2015. Demand for shophouses fell off a cliff in 2014, after the imposition of the total debt servicing ratio (TDSR) framework at the end of June 2013.
Three adjoining 999-year tenure shophouses in Amoy Street in Tanjong Pagar were recently acquired by an institutional fund for $59.6 million, or about $2,500 per sq ft, based on the floor area. In another deal, a family office bought a shophouse at 54 Boat Quay for $12.9 million or about $2,985 psf on the floor area.
Office properties, seen as a proxy for shophouses, have faced challenging leasing environment as a deluge of new office buildings weighed on rents in recent years. The average rental yield for shophouses ranges from 2.5 to 3.5 per cent, depending on the tenure of the asset.