Freehold, 999-year units to drive steady shophouse deals: Huttons

Such properties accounted for 87.5% of transactions in Q2. 

Singapore’s shophouse market could see a steady stream of transactions for the rest of the year, with demand concentrated in 999-year and freehold properties, according to Huttons Asia.

Long-tenure shophouses were preferred by buyers for their perceived ability to preserve value over time, the property agency added.

The sentiment comes as the sector recovered in the second quarter (Q2), with total transaction value reaching $193.7m, or 2.2 times the $90m in Q1. However, it remained 16.8% lower year-on-year (YoY).

Shophouses with 999-year or freehold tenure accounted for 87.5% of transactions in Q2. 

Meanwhile, there were 16 caveated shophouse deals during the period, up from 14 in the previous quarter but down from 20 a year earlier.

Huttons said the quarter saw larger deals. “The safe haven and low interest rates environment is spurring deals.”

The biggest deal was the $70m sale of three adjoining shophouses in Lorong Liput, Holland Village, to TL Developments.

A Japanese family office reportedly paid $22m for shophouses in Keong Saik Road, whilst another Keong Saik property changed hands for $16m.

The average transaction value rose to $12.1m from $6.4m in Q1. More than 60% of shophouses sold during the quarter were priced above $5m.

For the first half of the year, Huttons said there were an estimated 30 caveats, compared with 40 in the same period last year. Total transaction value fell 19.4% YoY to $283.6m.

Rental activity weakened during the quarter, with contracts falling an estimated 10.1% to 720 from 801 in Q1.

Median rents, however, rose 1.1% quarter-on-quarter to $6.50 per square foot per month.

District 2 recorded the strongest rental increase at 11.3%, followed by District 1 at 8.3%.

Huttons noted that market sentiment remained cautious amidst US-Iran tensions and higher fuel costs, which have added pressure on food and beverage operators.