In Singapore, when one talks about property investments, many investors would first think of condominiums, luxury apartments and Good Class Bungalows (GCBs).
Another quality choice for investors to consider investing in is Singapore’s heritage shophouses, or shophouses that are under conservation. There are basically three types of heritage or conservation shophouses:
a) Residential shophouses
b) Commercial shophouses, and
c) Mixed Commercial-residential shophouses.
Conservation or heritage shophouses are considered rare as there only roughly over 6,500 of such shophouses in Singapore. Built between the early-1800s and mid-1900s, not only are these heritage buildings rare, they continue to be an important part of Singapore’s cityscape and serve as a link to the nation’s past. The Urban Redevelopment Authority (URA) has identified the key locations where the shophouses are to be conserved.
Mr Adrian Tan, Associate Vice President at List Sotheby’s International Realty, Singapore, is a specialist in heritage shophouses for residential use. He has been studying Singapore shophouses for a long time.
Most recently in July 2018, Adrian closed a deal by selling vendor’s residential shophouse in Blair Road.
The transaction was worth $4.75 million ($3,182 psf), and marked a $820,000 increase from another similar sized shophouse a few doors away, also located at Blair Road, which was sold for $3.93 million a year ago. That’s more than 20 per cent difference.
Why Consider Shophouses?
As an owner of a residential shophouse, one gets to enjoy an ample amount of living space. Some people may like to have more space than living in a condominium, but find that bungalows are too big for their family size or simply do not want to manage the massive upkeep of bungalows (of course, the cost of upkeep also depends on the condition of the shophouse). In that case, a shophouse may just be the ideal property, especially for people who prefer the charm of a shophouse more than a terrace house.
A shophouse can offer owners between 3,000 to 5,000 sq ft of living space spread across two and a half levels that he or she can create their own unique abode for their family. Some of these spaces, like a loft aesthetic are not possible to achieve with condominiums.
Besides residential use, some shophouses are used as offices or commercial spaces. In particular, there are some companies, especially in the creative industries such as design or advertising agencies, that prefer to operate out of shophouses.
The benefit of living or working in a shophouse is that shophouses offer the luxury of space despite being in build-up areas such as the Central Business District (CBD), Chinatown or Joo Chiat as there are not many new developments with large gross floor area that can be built in these areas.
Value of Shophouses
Commercial shophouses generally fetch a higher price than residential shophouses by virtue that commercial land is more valuable because it has an income-generating attribute. Foreigners are free to buy commercial shophouses but not residential shophouses. This is because residential shophouses are classified as “landed houses” which are restricted properties that can only be owned by locals.
Moreover, as the government’s objective is to ensure a stable and sustainable property market, several cooling measures have been introduced over the past decade to curb the rise of home prices. The main measures include imposing additional buyer’s stamp duty (ABSD), Seller’s Stamp Duty, lowering loan-to-value ratio and introducing the total debt servicing ratio (TDSR) framework. As a result, commercial shophouses are perceived as a more attractive investment option.
Based on caveat data lodged between 2010 and October 2018, the sales volume of residential shophouses was at its lowest from 2014 to 2016. Nevertheless, prices of residential shophouses continued to rise partly due to the limited availability and partly due to the locations and condition of the properties sold. Some were located in Emerald Hill where the most expensive shophouses are located. The lower prices registered in 2017 and 2018 were mostly contributed by transactions in Joo Chiat and Geylang.
As for commercial shophouses, their prices were relatively resilient because they are seen as a cheaper alternative to the office buildings in Raffles Place. The hike in prices from 2017 to the current is in line with the rapid recovery in the office market.
Caveat data shows that on a per square foot (psf) basis, the highest price of $19,072 psf was fetched by a commercial shophouse at Boat Quay in June 2018, while the record price of $5,305 psf went to a residential shophouse at Emerald Hill in August 2016.
The table below shows how two commercial shophouses, 50 Tras Street and 64 Club Street, have seen their value appreciate by 71% and 68% respectively over a period of around five years.
Conservation vs Preservation
The Urban Redevelopment Authority (URA) oversees the conservation of buildings and sites. Conservation applies to buildings and sites with architectural or aesthetic importance. This means that owners of conserved sites and buildings can conduct repairs and restoration works, but only according to guidelines set by URA so as to “retain the inherent spirit and original ambience of the historic buildings as far as possible”. Broadly speaking, the façade of the conserved building must be retained while interior works can be done.
On the other hand, preservation entails even stricter guidelines and applies to National Monuments – sites and buildings which have historical value. These are protected by the Preservation of Monuments Act, upheld by the National Heritage Board’s Preservation of Sites and Monuments division.
With heritage shophouses, there are some restrictions and guidelines on renovations, such as having to seek clearances before changes can be made to the façade and before installing air-conditioning.
Unique Characteristics of Heritage Shophouses
Some of the heritage shophouses have special wall finishes which give them a distinctive look. To keep to the original characteristics of these finishes, these should not be painted over. Some of these special wall finishes include ceramic tiles, ‘fair-faced’ brickwork, mosaic tiles and Shanghai plaster, which is a mixture of cement, sand and crushed marble gives the appearance of solid stonework.
Even more rare are shophouses with special decorative ornaments which are culturally significant, including decorative scrolls, original granite column base, original granite corbel and some even feature a “Jian Nian” ornament formed with broken ceramic pieces. The prices of these rare shophouses and scarce real estate will very likely increase with time.
Other features of a conserved shophouse include a traditional five-foot way – a sheltered space for circulation that is an important element that contributes to the experience of walking through the conservation area.
Some shophouses also have an airwell in the middle of the property that may allow natural light to fill the house. These airwells also allow for the owners’ creativity and personality to come out as designers create unique spaces within the shophouse that would be the ideal conversation starter when hosting guests at home.
If one is really lucky, one will be able to find a shophouse that has either an open front or courtyards at the front or back that allow the owner to host special gatherings.