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Why shophouses are the most underrated properties in Singapore

Shophouses hold good value, and boast both space and history. It's also cool to say you live in one.

Why shophouses are the most underrated properties in Singapore

A row of shophouses in the Peranakan neighbourhood of Joo Chiat. (Photo: Facebook/VisitSingapore)

Few things get more attention than a shophouse for sale. They are unique buildings and evoke a sense of timeless nostalgia. Depending on the allowed uses, shophouses can be an inimitable home, a distinctive business address or even just an asset.

Here’s why shophouses are popular with property investors and buyers alike, and why you should give them some serious consideration.

SHOPHOUSES ARE USUALLY LOCATED IN CENTRAL LOCATIONS

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 per cent 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.

MANY SHOPHOUSES ARE PROTECTED AND HAVE CONSERVATION STATUS

Many shophouses in Singapore 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 legitimate collector’s item, and many enterprises in Singapore actually own shophouses as part of their assets.

SHOPHOUSES 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 S$2,600 psf for two shophouses near the Telok Ayer MRT station. The total price (S$18.2 million) is still one of the highest recorded transactions in the area, proving that shophouses can hold their value even in a weak market.

SHOPHOUSES OFFER A LOT OF SPACE

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.

SHOPHOUSES HAVE ONE-OF-A-KIND ARCHITECTURAL FEATURES

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

Some might also have an airwell in the middle of the shophouse. Besides 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.

LOCATION, LOCATION, LOCATION

So you’re a hard-nosed property investor, who’s not swayed by things like historical value or clever, ironically-named business in shophouses. 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, while shophouses in the Holland Village area have quick access to nightlife, retail, and dining.

Meanwhile, shophouses in places like Boat Quay in the heart of Singapore. There are so many shophouses located in a well built-up or central area, that it’s hard to go wrong when picking one. If you do find one, act fast – a shophouse (especially ones with conservation status) tends to sell quickly once it becomes available on the market.

This story first appeared on 99.co.

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