52 Boat Quay
Alan Chong, the founder of Wah Loon Engineering, has recently sold a six-storey shophouse located in Boat Quay for S$37 million. This marks a considerable profit from the S$21.35 million that he paid for the 999-year leasehold property back in 2018.
The purchaser of the property is an indirect wholly-owned subsidiary of Tai Tak Estates, which was incorporated in Singapore in 1954. Tai Tak, founded by the late banking tycoon Ho Sim Guan, is involved in various industries such as plantations, listed and private equities, and real estate. Additionally, Tai Tak already possesses other shophouses in the Boat Quay and South Bridge Road areas.
The most recent addition to the group's portfolio is 52 Boat Quay, which happens to be the tallest conservation shophouse along the Singapore River. The property is situated on a 1,119 square foot site and boasts a total built-up area of approximately 6,446 sq ft.
Braci, a Michelin-starred Italian restaurant, occupies the top two levels of the shophouse, which includes some roof terrace space. The first level features an izakaya bar, while the second to fourth levels are presently being leased to corporates as office space. A lift is available in the property, serving all floors.
The sale of 52 Boat Quay was handled by Savills Singapore, who confirmed their involvement but refrained from revealing any pricing or other particulars. Market analysts have noted that the Singapore shophouse market has experienced a slowdown this year due to several factors, including rising interest rates, which have caused many potential buyers to take a step back. Some sellers have opted to hold on to their price expectations, which has resulted in a widening price gap between buyers and sellers.
According to CBRE's analysis of URA Realis caveats data, downloaded as of March 20, 2023 (with the latest transaction dated March 6, 2023), there have been 19 shophouse deals totaling S$212.1 million in the current year. This represents a 7.7% decrease compared to the same period last year, which saw S$229.8 million in transactions.
In 2022, there were 189 shophouse deals amounting to S$1.61 billion, which was a decline from the previous year's peak of 254 transactions totaling S$1.94 billion. However, industry insiders suggest that there may be a considerable number of shophouse deals that were not included in the caveats data, as some buyers may choose not to lodge them. This is particularly true for transactions involving the sale of shares in a special-purpose vehicle holding the asset, such as the 52 Boat Quay deal. Ultimately, lodging caveats is not a mandatory requirement for property transactions, so it's possible that there have been additional shophouse deals that were not captured in the analysis.
In addition to the shophouse deals captured in caveats data for 2022, market analysts estimate that there were 20 to 30 non-caveated transactions amounting to around S$600 million to S$700 million. These deals involved shophouses in various locations, such as Telok Ayer Street, Amoy Street, Pagoda Street, Mosque Street, Keong Saik Road, Teck Lim Road, New Bridge Road, and Geylang Road.
Some notable examples include Clifton Partners' affiliates acquiring 68 and 69 Amoy Street for $$43 million, 97 Amoy Street for S$30 million (sold by a Malaysian individual), and 25 Boon Tat Street for S$24.8 million (sold by a vehicle linked to shophouse investor Ricardo Portabella Peralta, who is Spanish-turned-Singaporean). All three properties have a 999-year leasehold tenure.
Looking ahead to 2023, Clemence Lee, the executive director of capital markets at CBRE, predicts a decline in transaction volume due to a widening bid-ask gap between shophouse buyers and sellers. He notes that after two strong years of shophouse sales in 2021 and 2022, there are fewer shophouses available for sale, and most owners are unlikely to sell unless they achieve their desired price.
He added that investors have become more cautious due to the rising interest rates. Many potential buyers are waiting on the sidelines, hoping for a price correction before re-entering the market. Despite this, some owners are adjusting their price expectations, leading to transactions still taking place.
Savills' Yap expects that 2023 shophouse sales will not surpass last year's figures due to higher pricing expectations from owners. She notes that there are fewer motivated sellers in the market as most buyers who purchased shophouses in the past few years are holding onto them for mid to long-term investment, leading to a drop in supply. However, the head of a shophouse investment group told The Business Times that there are still owners who are willing to adjust their price expectations.
According to Richard Tan from PropNex Shophouse Elite, the level of interest and transactions for shophouses is still strong. He notes that new groups of overseas buyers, mainly from China but also from Hong Kong and Southeast Asia, have been showing interest in acquiring conservation shophouses worth S$30 million to $$40 million specifically in Districts 1 and 2, covering the CBD and Chinatown areas.
These buyers have already conducted market research before visiting the properties and are presenting the information to their boards for decision-making. However, Yap from Savills warns that decision-making may take slightly longer for these new-to-market buyers.
Lee from CBRE adds that due to higher interest rates this year, most investors are choosing to put more equity into their shophouse purchases. As a result, CBRE expects to see more transactions with deal sizes below S$20 million in 2023 compared to 2022, but prices per square foot of built-up area are likely to remain stable.