While recent headline news in Singapore has been dominated by big-ticket commercial sales, the conservation shophouse market has also seen a flurry of activity, with total transaction value doubling from SGD 60 million (USD 44 million) in 1Q16 to SGD 183 million in 2Q16. In the third quarter, sales rose further by 5.0% to SGD 191 million.

Driving this demand are boutique funds, family offices and foreign high-net-worth individuals looking for alternative investment asset classes, as well as for a safe haven amid economic uncertainties. For example, 8M Real Estate purchased seven shophouses for SGD 57.4 million in May 2016.  Set up in 2014, this boutique fund has reportedly accumulated a total of 15 shophouses worth some SGD 200 million within two years. Spanish tycoon Ricardo Portabella Peratta has also been on a shophouse shopping spree with his latest acquisition being a unit in Amoy Street for SGD 20.25 million.

Constructed between the 1840s and the 1960s, these generally two-to-three-storey, narrow and small terraced houses built in contiguous blocks with common party walls and sharing a sheltered verandah in front, formed much of the pre-war urban fabric of Singapore’s old city centre as well as that of several other parts of the island.

Despite their humble appearance, these shophouses are sought after not only for their heritage value but also their capital appreciation potential which is underpinned by their limited and static supply.  Additionally, investors are often presented with the opportunity to unlock the value of older properties through refurbishment or floor area intensification via rear extensions.

Also, they make for attractive investments due to their ability to generate a steady income stream on the back of healthy leasing demand. With rents typically at a discount to shopping malls, ground floor shophouse premises offering street-front shop space and flexible operating hours are popular with niche retailers and F&B operators. Furthermore, upper floor premises that can be had at rents lower than Grade A office space in the CBD, attract businesses in the creative fields such as architectural firms, interior designers and publishing houses, as well as start-up companies.

An added appeal that conservation shophouses have for investors lies in the fact that those zoned for full-commercial use attract neither additional buyer stamp duty nor seller stamp duty. These taxes currently apply in varying degrees to the purchase of residential and industrial properties and act as part of the Government’s attempt to stem speculation and prevent runaway asset prices in Singapore.

For foreigners looking to own a landed property in Singapore, conservation shophouses present a golden opportunity as, unlike landed housing, there are no ownership restrictions.

All said, while conservation shophouses may be an interesting asset class to look into, interested parties are advised to first of all familiarise themselves with the conservation, planning and development guidelines.

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