Demand for shophouses is expected to stay firm in 2024, given their limited supply, heritage value and potential for capital growth (Photo: Samuel Isaac Chua/EdgeProp Singapore)
SINGAPORE (EDGEPROP) - With persistent market uncertainties, the shophouse market is expected to grow only moderately in 2024 after the slowdown in 4Q2023, says PropNex in its shophouse report released on Jan 19.
Shophouse sales were muted in 4Q2023, with only 15 caveated transactions valued at $95 million. This is a 60% drop from the 37 deals in 3Q2023 and 58% lower than the 36 deals in 4Q2022. The quarterly sales were also the lowest based on transaction data since 2010.
In terms of transaction value, the $95 million in deals in 4Q2023 is a sharp 70% decline from about $317 million in 3Q2023. It is also about a 70% y-o-y decline from nearly $321 million in 4Q2022.
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For the whole of 2023, the shophouse market recorded 131 deals worth about $1.14 billion. This represents a 31.4% drop from the 191 deals and 29% fall from the $1.6 billion worth of transactions in 2022. It marks the slowest sales volume achieved in a year since 2019, when 123 deals fetched $916 million, based on caveats lodged. PropNex’s report attributes the weak sales to poorer market conditions, such as the high interest rate environment and the longer time needed to conduct more extensive due diligence. This comes with heightened alertness after the anti-money laundering crackdown in August last year.
The shophouse market saw consistent demand for leasing in 4Q2023, particularly for ground-floor shophouse space in prime areas due to tourism recovery and tight shophouse occupancies.
For 2024, PropNex projects that the demand for shophouses will remain firm, given their limited supply, heritage value and potential for capital growth.
This is particularly so for freehold conservation shophouses in the Central Region, which are sought after by investors. The additional buyer’s stamp duty (ABSD) hike in April 2023 may also push interested buyers and investors into the shophouse market, as ABSD is not pay able for shophouses.
The projected economic recovery, such as the interest rate cuts expected in 2H2024, may improve the tourism sector and the shophouse market, says PropNex.