In the third quarter 2023, fewer shophouses were sold as foreign buyers took a break following the S$2.8bn money laundering crackdown that began in August.

Huttons Asia compiled data from the Urban Redevelopment Authority that shows 37 shophouses were sold in Q3. The number of shophouses sold in Q3 was down by 21.3% compared to the previous quarter but higher than the 36 units in the same period last year.

Huttons’ report, published on Friday (10 Nov), showed that the value of transactions fell by 26.6% to S$317.1 Million from S$432.3 Million in Q2.

The volume and value in the July-to September period of this year were far below the recent sector peak in 2021.

In the second quarter of that year, 73 transactions took place and S$606 millions worth of sales from shophouses were recorded in fourth quarter.

In September 2023 there were only eight transactions, compared to 19 the month before.

The increased scrutiny and due diligence checks of customers, which followed the arrests of 10 foreigners in August, have dampened the demand for legitimate buyers.

The order prohibiting the sale of 152 properties was issued. These included 94 residential, 53 commercial and five industrial properties.

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Su Jianfeng is one of the 10 people accused of being involved in a deal for a shophouse on 28 Keong Saik Road that is owned by a company.

Richard Tan, the founder of PropNex Shophouse Elites said that his team had closed more deals in October than in Q3.

He said that although there was still demand for shops priced below S$15,000,000, there were fewer buyers in this price range. He added that foreign buyers might have been waiting and watching.

Lee Nai Jia said the recent drop in shophouse sales could be due to a number of factors.

While increased regulatory checks and due diligence measures may slow down sales in the short-term, this can be viewed as a temporary decline.

The top shophouse sales in Q3 were a three-storey, freehold, three-unit shophouse on Cheong Chin Nam Road, with a total land area (sq ft) of 11,947 sq ft. This was sold in September for S$41m, and three adjacent two-storey, freehold, shophouses in Jalan Besar, with a total land area of 6,378 square feet, sold in October for S$38.5m.

According to reports, in the last quarter shophouses on Ann Siang Road covering a land area of 1,446 square feet were sold for S$32million to a Singapore company of a Swiss-incorporated company.

Due to its affordable location and more accessible quantum, District 8 was most popular among investors. It accounted for roughly a quarter (25%) of all transactions in Q3.

The median shophouse rental fell by 3.9 percent to S$5.97 per square foot per month in the third quarter, after rising for seven consecutive quarters since Q4 2021.

Rents are likely to stay stable in the future due to tenant resistance to higher rents.

Prices will remain flat and transaction volumes will be thin. Owners of shophouses are not willing to sell, even if the have multiple shops. Shophouses can be used for many things, including gyms, hostels and co-living spaces.

Owners of shophouses tend to hold them for a long time and will not sell them unless they are offered a good price. However, given the current rate environment and the availability of other investment options that yield higher returns, some buyers may be unwilling to pay the highest prices for shophouses.

There are only 6,500 shophouses in Singapore that have conservation status.

Knight Frank data showed that the shophouse market reached a new high in 2021 with sales of S$1.9 billion.

In the first nine-month period of 2023, shophouse sales amounted to just over 120 transactions worth approximately S$1.1 billion. The 155 transactions worth S$1.3bn in the previous period were down.