Shophouse deals plunge 65% in Q4 on cautious investor sentiment

Dealmaking down for two consecutive years.

Shophouse deals plunged by 65% QoQ to $111m in the fourth quarter of 2023 as investors stayed on the sidelines while the market was clouded with uncertainties, according to a report by Huttons Asia.

Huttons said the number of shophouse transactions fell 50% to 16 deals last quarter, reaching the lowest level of dealmaking since the third quarter of 1998 – as both potential buyers and sellers take a pause.

For the whole of 2023, it said around 133 shophouses changed hands for a total of $1.2b, down 58% from the sales in 2022 that breached the $1.5b mark, and much lower than the almost $2b of investments in 2021.

“The shophouse market may stay subdued in the first quarter of 2024 due to buyers staying cautious and the lack of attractive options,” Huttons said. “Interest will pick up when there is a cut in interest rates.”

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The sale of a row of 6 adjoining shophouses along Serangoon Road to Singapore Maritime Officers’ Union for $62.5m marked was the largest shophouse deal last year.

Despite the slowdown, Huttons said shophouses remained one of the top investment asset classes due to the limited supply in the market.

It said shophouses also offer investors with potential for capital appreciation, while the increased additional buyer’s stamp duty does not apply to the asset class.

“Shophouses in city fringe locations are forecasted to see more interest among investors in 2024,” Huttons said. “With a rosier economic outlook and higher tourist arrivals expected, there may be higher leasing demand for shophouses in 2024.”