{"id":65556,"date":"2024-09-10T13:32:16","date_gmt":"2024-09-10T05:32:16","guid":{"rendered":"https:\/\/www.99.co\/singapore\/insider\/?p=65556"},"modified":"2024-09-17T11:50:58","modified_gmt":"2024-09-17T03:50:58","slug":"shophouse-investment-according-to-agent","status":"publish","type":"post","link":"https:\/\/www.99.co\/singapore\/insider\/shophouse-investment-according-to-agent\/","title":{"rendered":"How to choose a shophouse for investment, according to an agent"},"content":{"rendered":"
<\/div>

In the latest round of cooling measures announced last month<\/a>, we saw the Additional Buyer\u2019s Stamp Duty (ABSD)<\/a> rates increased to curb investment demand for residential properties.<\/p>\n

For Singaporeans and PRs owning a second home, the ABSD rate has been increased to 20% and 30%, respectively.<\/p>\n

The hike is the steepest for foreigners, as the ABSD rate was doubled from 30% to 60%.<\/p>\n

Following the increases, property analysts commented that investment demand will be diverted to other assets, including commercial properties, which are not subject to ABSD.<\/p>\n

Richard Tan, Senior Associate Group District Director at PropNex Realty, shared the same sentiment.<\/p>\n

\u201cThe cooling measure is to ensure housing affordability, such that residential properties serve a housing need instead of an investment need. As a result, more investors are diverted to alternative assets like commercial properties, such as a shophouse.\u201d<\/p>\n

In fact, Richard, and his team PropNex Shophouse Elites first started delving into the shophouse segment back in 2011\/2012. This was also when the government first introduced the ABSD<\/a>.<\/p>\n

Over a decade ago, Singaporeans buying their third and subsequent properties were subject to a 3% ABSD rate. The rate for PRs buying their second and subsequent properties was 3%. Meanwhile, the ABSD for foreigners was 10%.<\/p>\n

\"Cooling<\/a>
This graph shows the impact of cooling measures on the private property price index and volume over the years. Click or zoom on the image to magnify. Source: SRX<\/a><\/figcaption><\/figure>\n

\u201cBack then, our forte was mainly in Sentosa<\/a> and Marina Bay residential units. However, after the residential cooling measure was announced, we wanted to explore an alternative real estate investment to add value to our clients. So we started our journey in the shophouse segment, developing our passion for it.\u201d<\/p>\n

As of writing, PropNex Shophouse Elites has sold over 10 shophouses this year.<\/p>\n

The appeal of investing in shophouses in Singapore<\/h2>\n

As opposed to residential properties in Singapore, the main appeal of investing in commercial properties here is that they are not subject to ABSD. Likewise, investors do not have to pay the Seller\u2019s Stamp Duty (SSD<\/a>) for them, allowing them to offload a commercial property quickly.<\/p>\n

Both ABSD and SSD are only for residential properties. This also means that shophouses which are zoned for residential use are subject to these stamp duties.<\/p>\n

Unlike typical commercial properties, however, shophouses<\/a> are among the rarest types of real estate here, making them even more attractive to investors.<\/p>\n

Or as Richard explained on the difference between investing in residential and commercial properties such as a shophouse, \u201cIf the residential property is a commodity (for example, a need to have a roof over your head), then going for a commercial property, especially a shophouse, would be a collectible investment, an art with a finite supply.\u201d<\/p>\n

He likened shophouse investment to finding an unpolished diamond, adding that it is an art.<\/p>\n

\u201cFirst, every shophouse is unique. Second, they\u2019re a heritage; every shophouse has a history of its own. To spot an unpolished diamond in a shophouse usually requires a gut feeling developed from one\u2019s experience and in-depth knowledge in the segment.\u201d<\/p>\n

The agent then recounted a story about a client: he fell in love with a shophouse that he had purchased so much that he gained five more shophouses on the same street that were available for sale.<\/p>\n

\"tanjong<\/a>
Richard sold these two adjoining shophouse units late last year for S$37 million. Image credit: Richard Tan<\/figcaption><\/figure>\n

No restriction on who can own a commercial shophouse<\/h3>\n

Perhaps more importantly for investors, there is no restriction on the ownership of commercial properties, including shophouses. This means they can be sold to foreigners.<\/p>\n

Landed residential properties are restricted properties and cannot be owned by foreigners<\/a>. (An exception to this rule is the landed homes in Sentosa Cove<\/a>. Foreigners may buy them, subject to approval from the authorities.)<\/p>\n

So it is no surprise to hear about foreigners investing in shophouses here.<\/p>\n

According to Richard, overseas investors account for approximately 20 to 30% of the total shophouse transactions, and this proportion has been increasing. While they come from all over the region, they are mainly from Indonesia, Malaysia, and China.<\/p>\n

\u201cHowever, we\u2019ve seen an increase in interest from the Philippines as well.\u201d<\/p>\n

He added that in districts 1 and 2, almost 50% of the shophouse buyers are PRs and foreigners. Meanwhile, Singaporean buyers and companies mainly dominate the shophouse segment in districts 7, 8, 14 and 15. The proportion of foreign buyers is lower in these areas.<\/p>\n

Most of his clients are business owners and investors.<\/p>\n

With that, Richard and Tyson Yuk, Associate Group Director at PropNex Realty, have recently written a book about investing in shophouses.<\/p>\n

\"richard<\/a>
(From left to right) Richard Tan and Tyson Yuk from PropNex Realty, who recently released a book titled \u201cThe Untold Truth of Investing in Commercial Properties\u201d.<\/figcaption><\/figure>\n

\u201cOne of the reasons we wrote a book about shophouses is that we hope to empower more Singapore investors to own not just a piece of art, but also a heritage.\u201d<\/p>\n

Titled \u201cThe Untold Truth of Investing in Commercial Properties\u201d, the book includes a checklist of 10 critical points about investing in shophouses.<\/p>\n

\"extract<\/a>
An extract of Richard and Tyson’s book, “The Untold Truth of Investing in Commercial Properties”. Image credit: Richard Tan<\/figcaption><\/figure>\n

\"tanjong<\/a><\/p>\n

How to choose a shophouse for investment<\/h2>\n

Richard added that the commercial property segment is very wide. \u201cSome commercial realtors may have a passion for the hotel segment, while others may be passionate about the commercial industry.\u201d<\/p>\n

Using the analogy of finding an unpolished and raw diamond, he elaborated shophouses come in many forms. For instance, it could be a retail shop or a strata shophouse that has the potential for a change of use for a better tenant profile.<\/p>\n

Depending on the zoning of the shophouse, the owner can apply to the authorities for a change of use. For example, some shophouses can be used for restaurants, while some are not. Some may lopsided be allowed to be used for any F&B operations.<\/p>\n

\n
\n
\n

Shophouses for sale<\/h4><\/div>\n
See all listings<\/a><\/span><\/div>\n <\/div>\n
\n
\n
\n \"Hua\n <\/div>\n
\n
Hua Teck Siang Tng<\/div>\n
Hua Teck Siang Tng<\/div>\n
\n
\n \"bedroom\"\n <\/span>\n <\/div>\n
\n \"bathroom\"\n <\/span>\n <\/div>\n
\n 1,014 sqft<\/span>\n <\/div>\n <\/div>\n
S$ 2,400,000<\/div>\n <\/div>\n
\n