7 Things To Know About Shophouses In Singapore And Why They Are So Expensive

This article was first published on DollarsAndSense.sg.

According to a Knight Frank report, the total shophouse transaction volumes hit 132 units reflecting a sales value of $1.2 billion for the whole of 2023.

With the prices of the top 5 shophouse deals in 2H2023 reaching between $4,882 and $22,136 psf on land, they are one of the more expensive property types in Singapore. Here are 6 things to know about shophouses in Singapore.

Read Also: 4 Reasons Why A Good Class Bungalow (Assuming You Can Afford It) Is A Great Investment

#1 Shophouses Can Refer to Private Shophouses Or HDB Shophouses

In Singapore, shophouse can actually refer to two types of buildings. The first type comprises freehold or leasehold shophouses that have been constructed in the early days of Singapore. According to URA, these buildings are constructed between 1840s and 1960s and are usually two to three storeys high. They look like narrow, small terraced houses with a sheltered ‘five foot’ pedestrian way in the front.

These private shophouses are typically the focus of real estate reports and will be the focus of this article.

The second type refers to HDB shophouses. These are commercial units built by HDB as part of a neighbourhood estate. Typically, these units have a commercial shopfront, and sometimes residential quarters on the second-floor. These shophouses are managed by HDB and are technically leasehold property. As they have very different considerations from private shophouses managed by URA, we would not be referring to HDB shophouses when we use the term shophouses in the rest of the article.

Read Also: Complete Guide To Buying Landed Property In Singapore

#2 Shophouses Are Generally Considered Commercial Property

In general, shophouses are considered commercial property. This is important as it means that property buyers who already own a residential property without incurring additional buyer’s stamp duty (ABSD). However, do note that there are shophouses zoned or approved for residential use which will attract ABSD.

For investors who wish to buy a second property and not forgo the option of residential use, shophouses can be a good compromise.  Most shophouses are allowed to have residential quarters on the second floor.

Being approved for commercial use also means that foreign investors who are restricted from buying landed residential property, are allowed to purchase shophouses that are approved for mixed commercial and residential use.

Read Also: Additional Buyer’s Stamp Duty (ABSD): How Much You Have To Pay To Own Multiple Properties & 5 Ways To Avoid ABSD

#3 They May Be Used For Commercial And Residential Purpose

Shophouses can be zoned as both commercial and residential and their use would be determined by their location and zoning. Potential buyers and renters of shophouses can check the allowable use through URA’s Allowable Use For Shophouses & Selected Commercial Properties

Residential use may be limited in some areas. For example, in some areas, residential use can only be considered at basement and/or upper storeys commercial units, as the site is located within an area where activity-generating uses (such as shops and food outlets) are required at the 1st storey commercial units.

In other areas, the entire shophouse may be considered for evaluation for residential use with a Change of Use Application.

Read Also: Change Of Use Of Property for Commercial Spaces – A Complete Guide For Businesses in Singapore

#4 They May Be Gazetted Conservation Buildings

In Singapore, there are about 7,000 buildings gazetted for conservation. These are mainly shophouses and bungalows located mainly in the city centre and around the city fringe. This means that many shophouses available on the market, especially those in the following areas, are likely to be gazetted conservation buildings.

While being a gazetted conservation building is an affirmation of the building’s rarity and scarcity, it also means that there are restrictions to what you can do with the building.

The Historic Districts, which include Boat Quay, Chinatown, Kampong Glam and Little India, are among the city’s oldest areas. Shophouses here must be retained and restored in their entirety.

The Residential Historic Districts at Blair Plain, Cairnhill and Emerald Hill are residential areas which developed close to the city centre. There is more flexibility here in adapting the building for modern living, a new rear extension lower than the main roof can be built to the shophouse.

The Secondary Settlements such as Geylang and Joo Chiat are areas which developed later when people started to move out of the crowded city to live at the fringe. Emphasis is placed on retention of the streetscape, so shophouses here are allowed to build a new rear extension up to the maximum height allowed for the area.

#5 They Are Usually Located In Prime Locations And Have Freehold Tenure

As mentioned above, most of the conserved shophouses are located in prime locations like Boat Quay, Chinatown, Kampong Glam and Little India. Properties in these locations tend to command a higher premium compared to other non-mature regions.

Moreover, the land tenure of these shophouses also tends to be either freehold or 999-year leasehold. For instance, around 90% of the shophouses that were transacted in H2 2023, were of freehold status, as shown in the chart below. This is somewhat similar to the past years, where a higher proportion of the shophouse transactions were of freehold status.

Source: Knight Frank – Singapore Research – Shophouse 2H2023

These longer tenure properties also command a higher premium compared to properties that have a 99-year or shorter leasehold tenure.

#6 There Are Associated Architectural Styles For Shophouses

Source: URA

Most Singaporeans are likely unaware of the various shophouse styles unless they are a keen student of history or architecture. However, buyers of shophouses should be aware of the style and era of their shophouse purchase as it has implications on the building condition and the works that allowed for the building.

For example, older shophouses built in the early shophouse style may be constructed with materials that are showing their age. This may limit your renovation or require more extensive maintenance. The extensive ornamentation of the late shophouse style may look spectacular but may require specialised restoration work, especially if it is a gazetted conservation building.

#7 There Are Allowed Works For Conservation Buildings

To conserve the heritage and historical appearance, gazetted conservation shophouses have specific works that are allowed. Depending on the conservation area or building heritage, there may be specified colour schemes. For example, the Emerald Hill Conservation Area has a specified colour scheme of base colours in pastel hues, with stronger or lighter colours to highlight selected features or decorative ornamentation.

URA categorises building work such as painting, signage, change in material of five-footway tiles and installation of air-conditioning units as Category 3 Works which do not require submission by a Registered Architect or Professional Engineer. These works are allowed as long as guidelines are followed and an application is made and approved by URA.

However, other works that affect key elements of conserved buildings such as structure works or works that affect the heritage appearance, architectural character and spatial integrity of the conserved building are classified as Category 1 and Category 2 works which require a formal submission.

In general, buying and owning a shophouse may be slightly more complex than other commercial or residential properties, due to the conservation requirements of the building. The need to conserve and maintain the heritage of the building inherently makes it more expensive to own a shophouse compared to a modern build.

However, the very nature of being a conservation building also makes shophouses a rarity among Singapore’s real estate, increasing its desirability among property investors.

This article was first published on 10 January 2022 and has been updated with additional information.

Cover image by Moo Kar Ming, DollarsAndSense

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