A row of shophouses in the Katong district of Singapore.
Olivier Szczanna | Gamma Raffo | Getty Images
SINGAPORE — The ornate, colorful “shophouses” that line the streets of Singapore’s older districts are not what immediately springs to mind when people think of the city-state.
In a country where land is scarce and public housing costs more than $1 million, these two- and three-storey shophouses can cost tens of millions of dollars – but investors are still snapping them up.
The shophouses are colonial buildings, some of which were built as early as the 1840s, and are the subject of a government preservation programme.
The rich and famous, from Jack Ma’s wife to Hong Kong superstar Jackie Chan and Spanish tycoon Ricardo Portabella Peralta, are reportedly among the buyers of Singapore shophouses.
Famed Bridgewater founder Ray Dalio was also recently identified as the buyer of two shophouses along Singapore’s Club Street, though CNBC could not independently verify this.
Shophouse sales surged 52.2 percent quarter-on-quarter to S$169.1 million (US$125 million) in the first quarter of this year, according to a report by property consultancy Knight Frank, which blamed interest from wealthy individuals for the growth.
This is one of Singapore’s limited gems, with only around 6,000 units remaining, and what’s been preserved can never be replicated.
Sebestian Thor
Meir Collective
Mary Sy, executive director of capital markets at Knight Frank, said the most expensive commercial shophouses along Telok Ayer, Boat Quay and Stanley Street can go for more than S$5,000 ($3,700) per square foot – double the price of Upper Fifth Avenue in Manhattan, the world’s most expensive commercial rental location.
One of the biggest shophouse transactions last year was the purchase of six adjacent, well-preserved shophouses by a Chinese investor for S$80 million.
Shophouse charm
Property experts told CNBC that interest in these shophouses as an alternative asset class and collectibles has always been there, but has increased in recent years.
“This is one of Singapore’s limited gems, with only around 6,000 units left. What’s been preserved can never be recreated,” said Mr Sebestian Soh, chief placemaker at property investment firm Meir Collective.
No technology exists that can perfectly replicate the intricate moldings and design elements, he said, adding that some investors are keeping them as collectors’ items.
Nowadays, only the super-rich can afford to buy shophouses.
Royal Chin
Director, PropNex
Only about 6,500 of these shophouses, built during the colonial era between the 1840s and the 1960s, have been designated as conservation buildings. Knight Frank’s Sai said the shophouses can be used or rented for a variety of purposes, including food and beverage, boutique retail and family offices.
Commercial shophouses have become even more attractive after the government introduced a series of property cooling measures in April last year.
These included additional taxes on local residents buying second homes, as well as taxes on foreigners wanting to buy residential property.
Shophouses, which are categorised as primarily commercial, are exempt from these hefty fees.
Colorful old shophouses on Cross Street in Chinatown.
Photos from History | Universal Images Group | Getty Images
Real estate experts told CNBC that the majority of these shophouses are now being bought by wealthy local individuals and corporations, rather than foreign investors.
“Only the super-rich can afford shophouses now,” said Royal Chin, director of shophouse specialist PropNex, who defines the super-rich as those with a net worth of at least $30 million.
“People are looking for safe havens to preserve their wealth,” Chin said, adding that they are looking for safe real assets to park their money in, in addition to other more common asset classes.
“One of the very attractive areas within real assets in Asia Pacific is custodial assets,” he added.
