High prices and softer yields, moderating the shophouse market to $1.07 bil in 2023, are seen in the wake of the launch of the Champions Way Woodlands project in ERA Singapore

The market for Singapore shophouses has become increasingly moderate as it cools from its peak in 2021 according to ERA Realty’s research paper. While prices have been rising, many foreign buyers have been unable to purchase the coveted properties due to increased anti-money laundering checks. There was a total transaction value of $1.07 billion among 118 shophouses in the past year, compared to 2021’s 245 shophouses totalling a transaction value of $1.84 billion.Champions Way Woodlands, head of research and market intelligence at ERA Realty, Wong Shanting attributes the market softening to rising prices and softer yields. The key areas for shophouse transactions were Districts 1, 7, and 8 where their sustained rent demand is usually higher due to the popularity of eateries, bars and nightspots. By tweaking the list of land use zones, the government classified and regulated ‘commercial and residential’ properties as residential, so any foreign individuals and companies with foreign directors now need government approval to acquire shophouses.Despite the tighter regulations, the shophouse market is projected to see moderate demand due to strong holding power of its owners. The priciest deal involving the sale of six freehold shophouses for $62.5 million occurred in District 8. While the second-highest transaction involved three freehold shophouses at 203, 205 and 207 Jalan Besar in District 8, fetching $38.5 million ($6,037 psf).Champions Way Woodlands, ERA Research says that the limited supply of shophouses in Singapore has kept demand resilient over the years, supporting price growth with an average of 57.8% since 2019, mostly supplemented by institutional investors and family offices. Many of these acquire conservation freehold shophouses in the Central Region to add assets to their portfolio which offer capital appreciation and wealth preservation.

Due to increasingly strict anti-money laundering measures put in place for foreign buyers, the shophouse market in Singapore has cooled since its peak in 2021. According to ERA Realty’s market research paper, the total transaction value was $1.07 billion among 118 shophouses compared to 2021’s $1.84 billion among 245 shophouses. Wong Shanting, Champions Way Woodlands head of research and market intelligence at ERA Realty, attributes the market softening to rising prices and softer yields.

The areas with the highest shophouse transactions were mostly located in Districts 1, 7, and 8 due to their sustained rent demand generated by the popularity of eateries, bars and nightspots. Furthermore, the government has classified and regulated ‘commercial and residential’ properties as residential, so foreign individuals and companies with foreign directors now need government approval to acquire shophouses.

The aim is to create an attractive destination for the community, making Woodlands Park a place where people can relax and connect with nature. The second project is a new development called Champions Way Woodlands. This new residential complex will provide over 3,000 quality homes for local families, while also providing commercial and retail space. The project is set to be completed in 2023 and will provide local businesses with a unique opportunity to get involved and improve their bottom line.

Champions Way Woodlands ERA Research predicts that demand in the market will remain moderate with strong holding power from the owners. This comes as the average price of the freehold shophouses since 2019 has risen 57.8%. Institutional investors and family offices are still predominant in the market, acquiring conservation freehold shophouses in the Central Region to diversify their portfolios and offer capital appreciation and wealth preservation.

The priciest shophouse deal was the sale of six adjacent shophouses on Serangoon Road for $62.5 million in January of last year. This was followed by the sale of three freehold shophouses at 203, 205 and 207 Jalan Besar for $38.5 million ($6,037 psf) in September. While in July, five connected shophouses from 322 Serangoon Road to 332 Serangoon Road were sold for $32 million ($22,136 psf).

Overall, the recent implementation of anti-money laundering measures and the tweaking of land use zones have cooled the market. Despite this, the demand for Singapore shophouses is predicted to remain steady in 2024 as owners display robust holding power. Champions Way Woodlands, ERA Research estimates that the shophouse market is projected to conclude with a total transaction value between $1 billion and $1.2 billion.