Foreign buyers, family offices and funds support demand for shophouses

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SINGAPORE: Continued interest from foreign buyers, family offices and institutional funds supported demand for shophouses in the first quarter of 2021, after a strong surge in buying at the end of last year.

There were 51 transactions in the first quarter of this year for a total of S $ 328.3 million, according to data recorded on April 6.

Although this is down from the fourth quarter 2020 figures, which saw 57 sales worth S $ 462.8 million, analysts said it was a good performance reflecting stable demand.

Sales in the last quarter of last year had surpassed pre-pandemic levels, driven by pent-up demand, lower borrowing costs and high liquidity in the market, according to a Knight Frank report.

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As a new year dawns, investors are always keen to invest in shophouses, which are seen as defensive assets that retain value even in times of downturn, said Mr. Clemence Lee, senior director of shophouses. Capital Markets for Singapore at CBRE.

Specifically, Lee said interest from Chinese, Hong Kong and Malaysian buyers had “grown” after starting to pick up in the middle of last year.

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He pointed out that several notable recent deals were made by foreigners, such as a S $ 21.5 million deal for 22 and 23 Mosque Street and a S $ 15.7 million sale for 81 South Bridge Road. .

“Besides the attractiveness of shophouses as a type of defensive asset offering stability in uncertain times, Singapore’s strong and stable currency is also one of their main considerations, including investing in shophouses in Singapore. will serve as a hedge against currency risks in their home country, ”Lee said.

“Foreign buyers are also looking for shophouses because this asset offers them preservation and capital appreciation,” he added.

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Mr. Steven Tan, senior director of investment services at Colliers, added that funds, family offices and colocation investors also continue to contribute to demand.

Family offices are private wealth management companies serving very wealthy households.

“With the COVID-19 vaccination campaign and the number of community cases under control, investors are optimistic about the market outlook for the medium to long term. Investors now realize that the time is right to invest before prices start to climb, ”he said.

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Mr Tan also noted that shophouses have “an affordable entry point” for foreign investors looking to get into real estate in Singapore, as they will not require additional stamp duties from the buyer.

Ms Mary Sai, Executive Director of Knight Frank Singapore, echoed the observation that buyers are mainly family offices, investors and some foreign buyers – although she noted an “increased presence and interest” in requests and visits from family offices.

Like Mr Tan, Ms Sai attributed the general interest in investing in stores to positive sentiments in business, as vaccination programs are being rolled out.

She added that investors are also encouraged by falling vacancy rates, as more tenants and their employees return to the workplace, following an easing of COVID-19 rules on the workplace.

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PURCHASE OUTLOOK

Central business district shophouses remain the most popular – and this is likely to continue, experts said.

Nonetheless, CBRE’s Lee pointed out that interest in the outskirts of the city – such as Jalan Besar, Geylang and Joo Chiat – has increased due to the pandemic.

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“Suburban stores are generally more defensive as they primarily cater to the surrounding neighborhood,” he said.

“With more and more businesses adopting hybrid work models in the future, there is a good chance that people will visit stores in neighborhood centers on days when they are working from home, which increases footfall. companies hosted in these stores.

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Compared to those in city centers, these shophouses on the outskirts of the city also require more modest investments, while offering slightly higher returns, he said.

This makes them attractive to family offices “who prefer to diversify during this period and not put all their eggs in one basket”.

Ms. Tricia Song, who heads Collier’s research team, added that demand for shophouse will likely increase with the growth of more family offices in Singapore, against a backdrop of growing wealth in Asia.

Analysts added that another important factor that has long defined the market and will continue to keep it dynamic is the tight supply of these stores in Singapore.

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