It was reported in the Straits Times today (26 Sep) that a three-storey shophouse on Stanley Street in Singapore’s Chinatown was snapped up by a foreigner for $15.5 million last Sep.
In fact, the shophouse was bought by a local only in Jan last year for $11.5 million. In the span of just 8 months, the local seller has made himself a cool profit of $4 million. This works out to about a gain of $500,000 a month for the local investor.
In another transaction, a 1,149 sq ft shophouse at Arab Street, bought for $5.5 million last Feb, was sold for $10 million this Apr. The seller made an excellent profit of $4.5 million after owning the property for just 14 months. The identity of the buyer was not disclosed.
Altogether, there were 114 shophouse sales in the first six months of this year with a total worth of nearly $1 billion. The shophouse sector is poised for further gains following a new wave of demand coming from foreign investors, analysts said. Mr Leonard Tay from Knight Frank noted that foreign buyers are mainly from China and India.
PropNex Realty’s senior group district director Richard Tan added that other foreign investors also include Indonesia, Malaysia and Hong Kong. “(They) did not lodge a caveat as they wanted to keep a low profile. Some foreign investors also made their purchases through their companies,” Mr Tan explained. He himself has sold around five shophouses in Amoy Street and Stanley Street in the millions, over the past two years.
“These buyers see Singapore as a safe haven to park their wealth, especially when data has shown that majority of shophouse sales are profitable. Moreover, there are no restrictions on the number of commercial shophouses foreigners can buy without having to pay any additional buyer stamp duty (ABSD).”
Indeed, such huge gains are becoming almost routine as tight supply and lack of restrictions are attracting more foreign investors to buy up Singapore shophouses.
Data from Urban Redevelopment Authority (URA) shows that historically high per square feet (psf) prices are being broken for shophouses in conservation areas such as Little India, Tanjong Pagar, Kampong Glam and Geylang this year.
The highest psf price for Tanjong Pagar was recorded in May when a shophouse unit was sold for $10,215 psf or $13.25 million, while another went for a record psf price of $8,649 or $9.3 million in Little India in the same month.
Ms Yap Hui Yee, senior director of investment sales and capital markets at Savills Singapore, said, “Purchasers see shophouses as an opportunity to hedge against inflation and the volatility in the equity market and other asset classes. So amid the limited supply and high liquidity environment, they will continue to be the preferred asset class for mid-to-long term investments.”
And for foreigners, there is another added advantage — the strong Singapore dollar. By investing in Singapore properties, they are also hedging their own country’s currency against the Singapore dollar.
Foreigners Account For Very Small Proportion Of Private Housing Transaction Says Minister
Other than commercial properties, there has been growing concern from the public as to whether there is an increase of foreigners purchasing private properties in Singapore following news of bulk property purchases such as 20 units bought at CanningHill Piers, a condominium along the Singapore River, by a Chinese national for more than S$85 million.
In response to such concerns, Mr Leong Mun Wai, a Non-Constituency Member of Parliament, asked the Singapore Minister for National Development whether the inflow of foreign money into the local property market has increased in the last two years and if so, whether such inflow has pushed up private and public property prices in the last two years.
Minister Desmond Lee, in his response, noted that foreigners account for a very small proportion of private housing transactions. In the past two years, they accounted for around 3% of all private housing transactions. This is lower than the pre-pandemic level of around 5% between 2017 and 2019.
On the same topic, the Minister also provided data for Mr Gan Thiam Poh, MP for Ang Mo Kio GRC, who asked if the Ministry of National Development has data on the total number and percentage of private residential properties that are bought by locals and foreigners respectively for each of the past three years.