7 reasons why shophouses are the most underrated properties in SG

Few things get more attention than a shophouse for sale. They’re iconic buildings that are are unique to this region, and evoke a sense of timeless nostalgia. Depending on the allowed uses, shophouses can be a unique home, a distictive business address or even a trophy asset.

Recently, we’ve seen a spate of shophouses hit the market. Notably, a freehold shophouse in the Tanjong Pagar area was bought in 2013 for $6.2 million and then resold in 2017 for $9.1 million–a 47% profit over four years.

Here’s why shophouses are underrated and deserve more attention then they’re getting, versus the typical private condos!

#1. Shophouses dominate prime locations in the city area

Talk about being first-movers; shophouses were among the first buildings to be built in Singapore, and today, it’s amazing to see how much land they still take up in the city:

In places like Chinatown, Telok Ayer, or Amoy Street, shophouses are often used as an alternative office space. They’re especially favoured by startups or small companies that want a location within or near the Central Business District (CBD), but cannot afford the higher rental rates of conventional offices.

Most shophouses provide a rental yield of between 2.5 to 2.7% according to Colliers International; but there are occasionally boutique firms–such as design agencies–willing to fork out more for units that flow with their unorthodox, hipster-ish vibe.

Investors have long been aware of the consistency high demand for well-located shophouses. In fact, shophouses are one of the best ways to own land in the city, especially near the CBD, because land here is scarce and there isn’t room for landed private property.

#2. Many shophouses are protected like national treasures

Plenty of shophouses remain standing in Singapore as many of them–about 6,500–have rightly been given conservation status. Historic districts with conserved shophouses include Boat Quay, Chinatown, Kampong Glam, Little India, Blair Plain, Cairnhill, and Emerald Hill.

For conserved shophouses, the Urban Redevelopment Authority (URA) has put in place certain restrictions and rules on renovations, such as having to seek clearance before any air-conditioning can be installed. Although this can prove a hassle for shophouse owners and tenants, it’s overall a positive thing for investors; when the government takes back land for roads, MRT stations or other use, they have an obligation to try to leave the conserved shophouses untouched.

Most importantly, conserved shophouses have scarcity value (there’s a reason gold costs more than steel). And as time goes by, scarcity value can only increase, reflecting the sense of prestige and privilege in owning a sizeable piece of national history.

Conserved shophouses also tend to sell quickly once it becomes available on the market. It’s a legit collector’s item, and many enterprises in Singapore actually own shophouses as part of their assets, which brings us to the next point…

#3. Shophouses can seriously hold their value

Much like fine wine or art, shophouses provide a cultural value that’s not always easy to quantify. Moreover, a combination of the prestige that comes with owning a shophouse, along with the scarcity of these properties, helps them to hold value even during downturns.

For example, in 2015, when the property market was still in a slump, Spanish tycoon Ricardo Portabella Peralta paid around $2,600 psf for two shophouses near the Telok Ayer MRT station, which was one of the highest recorded transactions in Singapore at the time. Yes, shophouses can hold their value even in a weak market.

Also, while condo and HDB designs age and go out of style, shophouses have a timeless aesthetic. When have we ever got tired of seeing them?

#4. They offer a lot of space, despite being in densely built-up areas

When you think of living or working spaces in built-up areas, such as the CBD, Chinatown, or Joo Chiat, you’re probably thinking of small spaces. There aren’t many new developments that can be crammed into these already packed areas.

The good news is, shophouses were in this area long before they got so packed. That gives you a lot of room (often at least 1,200 square feet) despite being close to major amenities.

#5. Shophouses can make or break a business

It’s not usually hard to find a business tenant for a shophouse, because of its unique character.

The location of a business reflects on its philosophy and character (it’s the “flavour” of the business, if you like), and it’s hard to pull that off in some locations – malls and office buildings tend to have a standardised, modern-looking design and interior.

To understand the boost a shophouse can give to businesses, consider the famous Chye Seng Huat Hardware (a deliberately mis-named cafe-eatery located in a shophouse). The establishment’s retro-industrial image would be hard to pull off authentically in a shopping mall. Even if that had been possible, some stone-faced mall manager would probably take issue with the name and disallow it.

In terms of homes, shophouses let you create living spaces that are harder – or sometimes impossible – to achieve with cookie-cutter condo units. If you like the loft aesthetic, for instance, you can create it easily with a shophouse.

#6. Shophouses are architectural masterstrokes

Yes, the exterior of shophouses are amazing in its own right, especially the ones with intricate tiling. But only when you venture inside a shophouse will you feel that you’re in a truly special space.

Some shophouses have an open front or rear courtyard. This is an architectural boon that provides a perfect setting for family gatherings.

Some shophouses also have an airwell in the middle of the shophouse. Aside from allowing natural light to enter and optimising air circulation (essential before the days of air-conditioning), owners can also implement unusual features such as an indoor Zen garden or a giant water feature. One thing’s for sure, an interior designer is as excited as a kid in a candy shop everytime he/she gets a shophouse project to work on!

#7. Shophouses possess a sense of place and identity

So you’re a hard-nosed property investor, who’s not swayed by things like historical value or clever, ironically-named cafes. Well if you go back to the root of property value – location – there’s no denying shophouses have it.

Every shophouse-filled precinct in Singapore has its own unique character and vibe. Those along Katong are located in the middle of a gentrifying food paradise with distinctive Peranakan architectural influences, and shophouses in the Holland Village area are emblematic of laid-back nightlife, retail, and dining.

Want to buy a shophouse, or simply curious about what they look like? You can look them up on 99.co.

If you found this article helpful, 99.co recommends At 26, I rented a $3 Million Shophouse for free and Most Affordable Shophouse Rental Options For Your Small Business

Find the shophouse of your dreams today at Singapore’s most intelligent property portal 99.co!