Fewer commercial shophouse sales in 1Q2023, but shophouse rental market remains brisk: PropNex
Cautious sentiment due to high interest rates has resulted in commercial shophouse sales seeing moderation come into play in the first quarter of 2022. Data from PropNex Research shows that there have been 28 transactions, down from 35 in the last quarter. Freehold shophouses made up the bulk of sales in the same quarter.
On a year-on-year basis, the number of transactions has dropped to 28 in 1Q2023 from 52 in the same period for 2022; the total value of shophouse deals totalling $278 million for the quarter, an 11.7% drop from the previous quarter. Of the 28 shophouse deals last quarter, more than 80% were priced above $5 million, a 40.6% drop compared to the previous year.
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District 8, which includes Little India and Jalan Besar areas, saw the highest level of shophouse transactions in the first quarter of 2023, taking 41% of the total shophouse sales with $113 million in transactions. Here, seven units were sold in the district.
More muted activity was seen in prime Districts 1 and 2, with three and two shophouses sold respectively. This was largely due to a lower number of shophouses on the market. The average unit price on land area of freehold and 999-year leasehold shophouses saw a drop in Districts 1 and 2, while Districts 7 and 8 experienced an increase of roughly 8%.
In regards to the rental market, 886 rental contracts were signed for 99-year leasehold shophouses in Districts 7 and 8, a marginal decrease from 904 contracts in the previous quarter. Prices rose to a record high of $5.98 psf per month, up from $5.89 per month in the last quarter.
Even with the rise in buyer’s stamp duty as part of the 2023 Budget and increasing interest rates, PropNex has predicted that interest in commercial shophouses will remain, as long as there is limited stock and steady demand. Prices are expected to remain resilient, with more activity seen in fringe districts due to more affordable prices. In regards to the rental market, shophouse rents are expected to rise further in 2023 due to the recovery of the tourism and retail industries, as well as the limited availability of shophouse spaces for rent.