Historical Placemaking Properties: Trophy Assets Or Savvy Investments?

Shophouses have a special place in the hearts of many Singaporeans, but beyond their architectural charm, they offer investors and the community so much more. Simon Monteiro, senior associate vice-president of List Sotheby’s International Realty, discusses their value proposition.

- Simon Monteiro

The hive of activity centred around shophouse transactions in Singapore has drawn the attention of many investors local and abroad. With transaction volume increasing year on year by more than 10 per cent, in 2021 the real estate value of shophouses sold in Singapore had already exceeded $1 billion by the month of August.

Commercial shophouses are not subject to Additional Buyer’s Stamp Duty (ABSD) unlike residential real estate in Singapore where ABSD costs can add up to 25 per cent to the overall price of a property. Massive appreciation in prices over the past five years have further reinforced the attractiveness of these shophouses as investment assets.

Throughout my 25 years in the real estate industry, I have seen the valuation for shophouses continue to grow exponentially, reaching new heights with each passing year. In 2005, a shophouse in Duxton Hill transacted at $385 psf based on built-up area; in 2021, the same shophouse is valued at $3,000 psf.

Conservation shophouses are limited in supply, have great historical value and come with their own unique story. They have a certain appeal to investors who are seeking to buy up defensive assets, particularly in times of uncertainty. The ability of these shophouses to retain their value ensures their resilience as a property asset over time.

Caveat data by Singapore’s Urban Redevelopment Authority (URA) for property sales in the Central Business District (CBD) for the past two years show that the sale of shophouses in Districts 1 and 2 between January and November almost tripled, rising from 20 in 2020, to 59 for 2021. With only 3,000 shophouses in the CBD area, foreign buyers who are restricted from buying landed properties other than these commercial shophouses are possibly driving the demand.