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Ray Dalio, the billionaire founder of the world’s largest hedge fund, Bridgewater Associates, has once again demonstrated his keen eye for unique investment opportunities. Recently, Dalio made headlines by acquiring two prime shophouses in Singapore’s trendy Club Street neighbourhood. This move has sent ripples through the city-state’s real estate market, highlighting the increasing appeal of shophouses among affluent individuals and major investors.
More high-value deals were made during the first quarter, and 20 shophouse transactions were completed, including 17 freehold properties and 3 leaseholds. Dalio’s investment in the heart of Club Street, a lively area celebrated for its bohemian atmosphere and beautifully restored shophouses, sends a strong signal to other family offices looking to establish a presence in Singapore. His purchase of two 999-year leaseholds, virtually freehold, showcases the investment appeal of these distinctive properties among wealthy investors and institutions.
Source: Google Maps image of 44 and 46 Club Street.
Dalio’s purchase is not an isolated event but a broader trend that has seen a significant surge in shophouse sales and prices in Singapore. According to a report by Knight Frank, sales of these iconic properties rose by an impressive 52.2% to a staggering $169.1 million in the first quarter of 2024 compared to the previous quarter.
The average price of shophouses increased by 27.1%, reaching $5,566 per square foot, up from $4,380 per square foot in the last quarter of 2023.
Source: Google Maps image of exclusive Emerald Hill row of shophouses.
The total value of freehold shophouse sales in the first quarter of 2024 jumped by 44% from the previous quarter, reaching $149.9 million. The average price for these shophouses also increased by 10.9%, now at $5,671 per square foot compared to $5,115 per square foot earlier. This increase highlights the strong demand and growing interest in these unique properties.
Sunita Gill, co-founder and COO of Singapore Luxury Homes (SLH), notes, “This shift is partly because these increased ABSD rates make commercial property investments like freehold shophouses more attractive to foreign buyers and investors. Shophouses offer a unique blend of historic charm and modern functionality, making them highly desirable for commercial, mixed and residential use”.
Shophouses, particularly freehold ones, are attractive investments due to their commercial potential. These properties often feature retail or food and beverage outlets on the ground floor, with office or residential spaces on the upper floors. This mixed-use nature allows investors to maximise rental income and diversify their investment portfolios. Foreigners can own freehold shophouses with permission from the government, thereby avoiding the ABSD in most cases since they are generally classified as commercial properties, further enhancing their appeal.
Image Source: Mandala.club
Our Choices for Prime Freehold Shophouse Neighbourhoods in Singapore
For those interested in the most luxurious and high-investment opportunity shophouses, the following neighbourhoods are top choices:
- Emerald Hill offers a serene environment with beautifully preserved shophouses. Located near Orchard Road, this area is known for its quiet charm and historical significance. The shophouses on Emerald Hill are often used as private residences or boutique offices, making them a prestigious investment. The neighbourhood’s tranquil setting and proximity to the bustling Orchard Road shopping district make it a highly desirable location.
- Amoy Street is a one-way street lined with beautifully conserved shophouses that date back to the 19th century in Chinatown. These shophouses have been repurposed into trendy restaurants, bars, and boutiques, creating a lively atmosphere. Amoy Street is particularly popular among locals and tourists for its vibrant nightlife and diverse culinary offerings.
- Club Street, which runs parallel to Amoy Street, is another charming stretch of shophouses transformed into a hub for dining and entertainment. The street is known for its cosy cafes, stylish bars, upscale restaurants and family offices, many of which are housed in restored shophouses.
- Tanjong Pagar is a prime location that offers a mix of modern and traditional elements. It is part of Singapore’s Central Business District (CBD), making it a strategic business location. The area is known for its beautifully conserved shophouses, often used for offices, retail, and F&B outlets. Tanjong Pagar’s shophouses are prized for their high rental yields and potential for capital appreciation.
- Craig Road begins at the junction of Neil Road and Keong Saik Road and ends at Tanjong Pagar Road. This street has conserved shophouses repurposed into various businesses.
- Keong Saik Road has a rich history, having once been a red-light district and home to various clan associations that supported early immigrants to Singapore. Today, the street and surrounding area have a distinctly bohemian vibe, attracting a trendy crowd seeking a unique and authentic experience.
- Kampong Gelam is famous for its eclectic mix of shops, cafes, and historical sites. This neighbourhood is known for its vibrant cultural scene and unique architectural styles. Shophouses in Kampong Gelam are popular among investors due to their prime location and the area’s strong appeal to locals and tourists. The neighbourhood’s rich history and cultural significance add to the intrinsic value of its shophouses.
- Joo Chiat is a charming area with a rich Peranakan heritage and colourful shophouses. This neighbourhood is known for its vibrant cultural scene and unique architectural styles. Shophouses in Joo Chiat are popular among investors due to their prime location and the area’s strong appeal to locals and tourists.
Returning to Dalio’s recent purchase, it is worth noting that other family offices are also capitalising on the unique opportunities presented by shophouses. Many rent out the ground floors for commercial retail and F&B purposes while using the upper floors for their offices. This strategic use of space maximises rental income and provides a prestigious and functional location for their operations.
Investors are drawn to the potential for high rental yields and capital appreciation as the demand for retail, food and beverage, and entertainment spaces in these vibrant streets remains strong. The unique character and ambience in these areas contribute to the intrinsic value of these freehold shophouses, making them attractive investments for those seeking a blend of heritage and commercial potential.
If you’re a local or foreign investor looking for a solid investment return, contact SLH’s commercial properties team to discuss your options for owning a freehold shophouse in Singapore.
FAQs about Freehold Shophouses
Breakdown of Freehold vs Leasehold Transactions
The surge in shophouse sales has been driven largely by demand for freehold properties. In the first quarter of 2024, out of the 20 shophouse transactions recorded, 17 were for freehold shophouses, while only 3 were leaseholds. This underscores the strong preference among investors for the perpetual ownership that freehold properties offer.
Advantages of Freehold Shophouses
Freehold shophouses are highly coveted by investors due to their perpetual ownership and lack of lease expiration. This provides a sense of security and long-term investment potential, as the property can be held indefinitely or resold without the constraints of a leasehold tenure. Additionally, freehold shophouses offer greater flexibility for redevelopment or renovation, as owners are not bound by the restrictions often associated with leasehold properties.
Premium Pricing and Resale Value
Freehold shophouses command a premium pricing compared to their leasehold counterparts, reflecting their scarcity and perpetual ownership. As of the first quarter of 2024, the average price for freehold shophouses stood at $5,671 per square foot, significantly higher than the average price of $5,566 per square foot. This premium pricing is driven by the strong demand and limited supply of freehold shophouses, which are highly sought-after by investors seeking long-term capital appreciation and resale value potential.
Historical Trends in Shophouse Prices in Singapore
Shophouse prices in Singapore have experienced rapid appreciation over the past decade, rising by around 20% annually, driven by strong investor demand for these unique heritage properties. Prices surged to record highs recently, reaching an eye-watering $5,500 psf as of early 2024 – double the rate of Manhattan’s priciest shopping street. The overall average shophouse price jumped 27.1% quarter-on-quarter to $5,566 psf in Q1 2024, with freehold units averaging $5,671 psf (up 10.9%) and leaseholds at $4,895 psf (up 243.9%). While sales volumes peaked in 2021 at 254 units worth $1.94 billion, prices have continued their upward trajectory year-over-year, reflecting the limited supply and consistent demand for these coveted commercial residential properties across prime districts of Singapore.
Shophouses as ‘Safe-Haven’ Assets During Economic Downturns
With only around 7,000 conserved units, shophouses are viewed as a safe-haven investment during uncertain economic times due to their extreme scarcity. Their limited supply, resilient price performance during past recessions, and strong rebound and significant capital appreciation post-downturn make them an attractive option. The unique mixed-use potential allowing both residential and commercial income streams provides a buffer against market volatility. Moreover, savvy investors have historically perceived shophouses as a relatively safe asset class, driving continued demand that supports prices even amid broader economic headwinds. This self-fulfilling “safe-haven” perception, combined with their scarcity value, diversification benefits, and recession-resistant traits, underpins the appeal of shophouses as a defensive investment play.
