Shophouse market shines amidst sharp increase in ABSD

In 2Q23, sales of shophouses jumped 45.5% QoQ.

The sharp increase in the Additional Buyer’s Stamp Duty (ABSD) to 60% for foreigners has led to increased interest from property investors in the shophouse market, according to Huttons.

In a report, Huttons said ultra-high net worth individuals (UHNWI) and family offices “maintained their keen interest in the shophouse market segment to preserve and grow their wealth.”

In 2Q23, the market recorded a strong uptick in transaction volume and value, rising 45.5% QoQ to 50 and 53.6% QoQ to $512.3m, respectively.

During the period, the most popular district amongst shophouse inventors was District 8 given its “more affordable quantum.” District 8 accounted for 52.8% of the total transactions for 2Q23.

Meanwhile, 999-year leasehold and freehold shophouses remained the preferred choice among investors for wealth preservation.

“Investors are less bothered with borrowing costs as they either pay in cash or borrow a small quantum,” Huttons said.

In 2H23, Huttons expects more activity in the shophouse market, with foreigners paying more attention to the segment.

“The Government introduced a set of control measures on land zoned for commercial and residential use on 20 July. Such land will now fall under the Residential Property Act and foreigners will require permission from the Singapore Land Authority for the purchase. An estimated 5% of shophouses are on land zoned for commercial and residential use,” Huttons said.

“Almost all investors buy commercial zoned shophouses for the flexibility in use. Hence, there is limited impact on the shophouse market. The doubling in ABSD for foreigners buying residential properties and new control measures on land zoned for commercial and residential use has sent a clear signal to the market,” Huttons added.

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