Anti-money laundering bust affects shophouse sales

In 1Q24, shophouse deals rose 31% QoQ but fell 34% YoY.

The shophouse market expanded by 31% QoQ but declined by 34% YoY in 1Q24, PropNex reported.

Citing media reports, PropNex reported that several shophouses linked to an anti-money laundering bust have been put up for tender by banks, which sparked strong interest from numerous bidders.

Shophouse deals in 1Q24 amounted to $180m, rising 62% QoQ but declining 39% YoY from $297m in 1Q23. PropNex attributed the decline to the slower sales activity in 1Q24.

In terms of pricing, PropNex revealed that shophouses in prime districts saw an increase over the previous year with the average transacted unit price on freehold and 999-year leasehold shophouses in D1/2, D7/D8, and D14/15 growing sharply by 44.1% YoY, 1.4% YoY and 24% YoY, respectively.

In addition, 99-year leasehold shophouses in D7/8 saw a 7.7% rise in the average unit price per land area, while those in D1/D2 fell by 18.4% YoY. 

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Meanwhile, the average price for shophouses outside prime districts dropped by 16% YoY.

Rents-wise, the shophouse market in 1Q24 remained robust due to tourism, with 856 rental contracts totalling $9.6m signed, down from 922 contracts worth $9.9m a year ago.

For 2024, PropNex sees several potential market drivers, including the projected improvement in the Singapore economy in 2H24, tourism recovery, the 30-day visa-free arrangement with China, and a shift in investment towards shophouses, which are not subject to ABSD.

PropNex, however, also noted that market uncertainties, pricing mismatch, limited availability of units for sale, and the effects of the anti-money laundering bust last year may lead to more extensive due diligence processes.

Additionally, PropNex anticipates investors to target properties in fringe and secondary areas where price negotiations are feasible, unlike in prime districts where owners are less likely to sell.