So long, old shop: Shophouse prices plunge 23% as stingy retailers exit

A drastic price mismatch is ailing the niche market.

Singapore’s retailers are foregoing the iconic shophouse for more mainstream and profitable locations. The transaction volume of shophouses continued to fall in 1H14, thanks to an increasing mismatch between vendors’ asking prices and the prices that buyers are willing to pay.

A report released by Knight Frank yesterday revealed that shophouse prospective sellers have started to see resistance from the market since 2H 2013 amid compressed rental yields, which mainly resulted from vendors’ high price expectations.

Transaction volume of shophouses continued to fall further in 1H 2014, totalling 40 transactions compared to 49 transactions in 2H 2013. Prices of leasehold shophouses fell drastically by 23% in 1H 2014, with an average of $4,717 per sq ft of land area, compared to $6,163 per sq ft per land area in 2H 2013.

Meanwhile, the average transacted price of freehold shophouses fell 10.8%. A significant proportion of the shophouses sold in both periods was in District 8, or typically comprising the Little India area, despite security concerns following the riot in December 2013.

According to Knight Frank, “As for shophouses, some owners will still hold on to their assets, betting
on the limited supply of such unique properties, while buyers are waiting at the sidelines. Demand for shophouses and strata-titled retail properties is likely to remain low at least for second half this year, due to the compressed yields and current mismatch between buyers’ bids and sellers’ asking prices.
As such, prices of shophouses are expected to see a decline of 10 to 15 per cent in the next 6 to 8 months.”