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Homes Why Are Shophouses In Singapore In Such High Demand?

Why Are Shophouses In Singapore In Such High Demand?

Why Are Shophouses In Singapore In Such High Demand?
The bedroom of the Shang House is furnished with pieces from local brand Scene Shang (Image: Ivan Tan, courtesy of Figment)
By Sandhya Mahadevan
May 11, 2021
Shophouses have always had a cool factor about them. But these icons of Southeast Asian architecture are now sought-after by local and foreign investors alike for reasons beyond that

When you think of Singapore, the things that come to mind immediately are its multi-cultural cuisine, swanky malls and high-rise residences. Amidst these, and in complete contrast, are its bold, bright and ornate shophouses. As the name suggests, these often two- to three-level buildings, have shops on the lower levels and residences above—they used to house the merchants and owners of these shops in the 19th century. They are an integral part of Singapore’s heritage, and for years now locals and foreign investors have been vying for a piece of that pie. 

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The facade of the Shang House, a rental property marketed by Figment (Image: Ivan Tan, courtesy of Figment)
The facade of the Shang House, a rental property marketed by Figment (Image: Ivan Tan, courtesy of Figment)

Although Singapore has always attracted foreign investments in the property market, when it comes to shophouses, about 80 per cent of purchasers are Singaporeans, who look at them for both investment purposes and capital appreciation, says Mary Sai, executive director, Capital Markets (Land & Building, Collective & Strata Sales) at Knight Frank Singapore.  
 
Yap Hui Yee, director of Investment Sales & Capital Markets at Savills (Singapore) Pte Ltd, agrees. Her team has brokered approximately $130 million shophouse transactions to Singaporeans of high net worth and foreigners based here in the past four months—with only 20 per cent of buyers from the latter category. 

The facade of shophouses (Photo: Danica Tanjutco/Unsplash)
The facade of shophouses (Photo: Danica Tanjutco/Unsplash)

According to Knight Frank’s Wealth Report 2021, the number of Ultra High Net Worth Individuals—with a net worth of US$30 million inclusive of their primary residence—in 2020 went up by 10.2 per cent from 2019 despite the pandemic-led recession. “Besides other luxury properties in Singapore, shophouses also provide a draw for such investors looking into niche commercial space with cultural character,” says Sai. 

See also: A Restored Bungalow In Petaling Jaya That Fuses Modernism With Tropical Charm
 
The number is steadily rising, notes Clive Chng, associate director of Red Brick Mortgage Advisory. In 2020 amidst the pandemic, 135 shophouses were sold, which was a 10 per cent increase from the 123 shophouses that were sold in 2019. 

Shophouses also provide a draw for such investors looking into niche commercial space with cultural character

— Mary Sai, executive director, Capital Markets (Land & Building, Collective & Strata Sales) at Knight Frank Singapore

The entrance of Canvas House, which features an interior crafted by Ministry of Design (Image courtesy of Figment)
The entrance of Canvas House, which features an interior crafted by Ministry of Design (Image courtesy of Figment)

“Shophouses have already captured the imagination of foreign investors with its rarity and hence heritage value, which provides a capital preservation element to the investment,” says Fang Low, CEO and co-founder of Figment, which focuses on reviving these charming icons of the old world as co-living spaces.

Besides, there are only 6,500 shophouses in total around Singapore, and they are gazetted as conservation buildings. For many Singaporeans like Low, the investments are more of an emotional nature. “There are elements of cultural value and historical significance that a financial term sheet could never capture”, he says.  

See also: Introducing Tatler House: An Exclusive Venue At The Mandarin Oriental, Kuala Lumpur

A bedroom in the Canvas House by Ministry of Design (Image courtesy of Figment)
A bedroom in the Canvas House by Ministry of Design (Image courtesy of Figment)

Shophouses have already captured the imagination of foreign investors with its rarity and hence heritage value, which provides a capital preservation element to the investment

— Fang Low, CEO and co-founder of Figment

Their scarcity also means that they hold their value well, amidst a recessionary environment, says Chng. “Buyers may be drawn to shophouses for their heritage value, location or distinct architecture, but many investors also view moving into a shophouse as a defensive play. The increase in Additional Buyer Stamp Duty since July 2018 has also made commercial properties and shophouses more lucrative investment options."

Yee adds: “Purchasers see shophouses as an opportunity to hedge against the volatility in the equity market and other asset classes. So amid the limited supply, and high liquidity and low-interest rate environments, they will continue to be the preferred asset class for mid-to-long term investments."

Related: Living With Covid-19 Pandemic: 7 Property Trends To Watch In 2021

Shophouses along Kampung Bahru Road (Photo: David Kubovsky/Unsplash)
Shophouses along Kampung Bahru Road (Photo: David Kubovsky/Unsplash)

Another noticeable trend in the “new normal” has been the shift in demand from the prime districts of D1 and D2 towards city fringe areas as more companies adopt to work from home arrangements.  
 
“Vacancies in shophouses have been filled up since the resumption of business activities and roll-out of vaccinations in Singapore,” says Sai. “As such, many shophouse owners have been optimistic in their asking prices for sales and rentals since the beginning of the year. This trend is likely to continue causing an upsurge in transaction values and volume.”  

“Relatively speaking, more investment flowing into the shophouse space is always a good thing because it reduces the dense urban sprawl of Gross Floor Area (GFA)-maximised, cookie-cutter condominiums we see cluttering our Singapore skyline today,” says Low. “This trend is a strong tailwind for Urban Redevelopment Authority’s conservation efforts. We see investment funds today put to work in restoring these shophouses, even further out in the city fringe, to their former splendour. Like George Town in Penang, maybe we might even see Singapore shophouses being added to the list of UNESCO World Heritage Sites in the near future.” 

See also: Meet The Malaysian Architects Rebooting Heritage Buildings

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Homes Tatler Homes investment Singapore shophouse architecture design

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