TOTAL SHOPHOUSE SALES DECLINED IN Q2 ALTHOUGH MORE FREEHOLD SHOPHOUSES EXCHANGED HANDS

SINGAPORE RESEARCH

COMMERCIALSALES

“Freehold shophouses in the city fringe are becoming more popular. They are more affordable than those in the districts 1 and 2 and have substantial upside in capital appreciation especially in areas earmarked for future growth.”

MARY SAI Executive Director, Investment & Capital Markets

Q2 2019 SHOPHOUSEMARKET SNAPSHOT

Total shophouse sales value decreased to S$209.9 million in Q2 2019 from S$219.90 million in Q1 2019.

OverviewShophouse sales in Q2 2019 amounted to S$209.8 million, which was a 4.6% quarter-to-quarter (q-o-q) decline from S$219.9 million in Q1 2019.

The total sales value of freehold shophouses increased more than two-fold to $189.3 million in Q2 2019. However, there was a drop in the sales value of leasehold shophouses, which declined by 84.4% q-o-q to S$20.5 million in Q2 2019. The drop in sales could be due to leasehold shophouses being held more tightly by owners as they can command higher yields.

There were 32 shophouse transactions lodged in Q2 2019, a 23.0% q-o-q increase from 26 in Q1 2019. The number of freehold shophouse transactions rose from 18 in Q1 2019 to 30 transactions in Q2 2019 .In contrast, only two leasehold shophouses were transacted in Q2 2019, as compared to the eight leasehold shophouses in Q1 2019 (Exhibit 5).

SINGAPOREQ2 2019 COMMERCIAL SALES RESEARCH BULLETIN

EXHIBIT 2

Districts with the most transactions based on Caveats lodged

No

. of

Un

its

12

10

8

6

4

2

0

Q1 2019Q2 2018 Q3 2018 Q4 2018

D2 D15D8 D2D8 D14 D14D8D1 D1 D8D2 D2 D1D19

Q2 2019

D2 D14 D8 D14

Source: REALIS (as at 27 June 2019), Knight Frank Research

EXHIBIT 3

Top 5 Deals in Q2 2019 (By Price Quantum)

Unit Price(S$ psf)

Address

2 Cavan Road19 Hongkong Street355/357 Jalan Besar57 Temple Street 273 New Bridge Road

Area (sq ft)

1,9268,0743,1248,4116,805

20,096.01,862.23067.71054.91280.9

District 14 has been showing up strongly in shophouse sales in past four quarters, together with Districts 2 and 8.

Source: REALIS, Knight Frank Research

The average price per square feet (psf) of the freehold shophouses increased by 11.6% q-o-q to $3,229 in Q2 2019 (Exhibit 5). Buyers were attracted by the tenure and the upside for further capital appreciation in the next 5 to 10 years.

The average price psf of the leasehold shophouses transacted in Q2 was 86.4% higher than the average price psf of freehold shophouses in Q2. The two leasehold shophouses that were sold in Q2 were in better locations and sat on smaller land sizes compared to the freehold shophouses transacted in the same period. Notwithstanding, the average price psf of leasehold shophouses declined by 6.0% q-o-q to $6,019 in Q2 2019 (Exhibit 5).

The sale of the shophouse at 2 Cavan Road (freehold) at $38,710,000 tops the transactions in Q2 2019 in terms of quantum (Exhibit 3). The shophouse at 2 Cavan Road presently accommodates a light industrial-cum-warehouse building in a 20,100 square feet (sqft) site and has an under-utilized gross floor area (GFA).

The sales value of transactions in Kallang was the highest among the planning areas in Q2. Kallang recorded 5 transactions (such as 2 Cavan Road and 355/357A Jalan Besar Road), amounting to a total sales value of S$62.5 million, in Q2 2019. *Refer to Annex A for Exhibit 1

Ranking the transactions by quantum in Q2 2019, there were four freehold shophouses and one leasehold shophouse in the top five transactions. The deal with the largest quantum in Q2 2019 was the sale of 2 Cavan Road in Kallang.

TransactedPrice (S$ psf)

38,710,00015,000,0009,580,0008,900,0008,680,000

Tenure

FreeholdLeaseholdFreeholdFreeholdFreehold

SINGAPOREQ2 2019 COMMERCIAL SALES RESEARCH BULLETIN

EXHIBIT 5

Number of Transactions and Average Price psf of Freehold and Leasehold Shophouse Units

No

. of

Cav

eats

Lo

dg

ed

Ave

rag

e $p

sf L

and

Are

a

CAVEATS LODGED FH (RHS) CAVEATS LODGED LH (RHS)AVERAGE $PSF_FH (LHS) AVERAGE $PSF_LH (LHS)

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

60

50

40

30

20

10

0Q2

2019Q2

2016Q3

2016Q4

2016Q1

2017Q2

2017Q3

2017Q4

2017Q1

2018Q2

2018Q3

2018Q4

2018Q1

2019

Source: REALIS (as at 27 June 2019), Knight Frank Research

EXHIBIT 4

Property Gains for Shophouses Transacted in Q2 2019

Price Sold inQ2 2019 (S$million)

Address

253/253A Jalan Kayu57 Temple Street17 Blair Road19 Blair Road517 Serangoon Road22/22A/22B Sam Leong Road

Land Area(sq ft)

4.08.97.56.74.76.8

1410.11054.92120.52109.71593.11334.7

Return

166.7%145.2%101.1%79.1%67.1%48.4%

Estimated numberof years held

879971

Source: REALIS (as at 27 June 2019), Knight Frank Research

Prices of freehold shophouses moved up slightly following a decline in the previous quarter, while prices of leasehold shophouses corrected slightly after last quarter’s significant increase.

Several shophouses saw a high return over the span of 7 to 9 years. One exception is the sale of 22/22A/22B Sam Leong Road, which yielded the seller a 48.4% return within a year.

Market OutlookShophouses are expected to continue to experience robust demand, especially conserved shophouses with strong heritage significance. The prices of these heritage shophouses are likely to appreciate over time due to their scarcity.

Shophouses are also enjoying a new lease of life with the emergence of hidden bars at the rooftops and second floors. Adjoining shophouses are also attractive if they can be used as hotels, given the optimistic outlook in Singapore tourism sector.

FOR COMMERCIAL SALES ENQUIRIES, PLEASE CONTACT:

Mary Sai Executive Director Investment & Capital Markets 6228 6886 mary.sai@sg.knightfrank.com

FOR FURTHER INFORMATION, PLEASE CONTACT: Lee Nai Jia Head Research 6228 6878 naijia.lee@sg.knightfrank.com Khoo Zi Ting Analyst Research 6228 7377 ziting.khoo@sg.knightfrank.com

This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by Knight Frank Pte Ltd and its subsidiaries for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report, this material does not necessarily represent the view of Knight Frank Pte Ltd and its subsidiaries in relation to particular properties or projects. Reproduction of this report in whole or in part is not allowed without prior written approval of Knight Frank Pte Ltd to the form and content within which it appears. Knight Frank Pte Ltd is a private limited company which is incorporated in Singapore with company registration number 198205243Z and CEA licence number L3005536J. Our registered office is at 10 Collyer Quay #08-01 Ocean Financial Centre Singapore 049315.

© Knight Frank Singapore 2019

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Annex AEXHIBIT 1Total Value of Shophouse Transactions by Planning Area

Source: REALIS, Knight Frank Research

0 - 0

0 - 10,000,000

10,000,000 - 20,000,000

20,000,000 - 30,000,000

30,000,000 - 40,000,000

40,000,000 - 50,000,000

50,000,000 - 60,000,000

60,000,000 - 70,000,000