COMMERCIAL shophouse sales in the first quarter of 2023 fell to 28 transactions – the lowest in quarterly sales volume in nearly three years, as investors turned cautious on high interest rates, said a PropNex report on Tuesday (Apr 25). 

Sales in Q1 2023 were marginally higher than the 23 shophouses sold in the second quarter of 2020, when pandemic restrictions wiped out activity.

The tally for the first three months of this year was down from 35 sold in the previous quarter, and was 46 per cent lower year on year from 52 in Q1 2022. 

Average transacted prices stayed resilient in Q1 due to the limited number of properties put up for sale. More than 80 per cent of properties were sold for more than S$5 million. This compares to 71.4 per cent of the deals last quarter, and 57.7 per cent in Q1 2022. 

However, the transaction value of deals fell 11.7 per cent from the previous quarter to S$278 million, and was 40.6 per cent lower year on year. Q1 chalked up the lowest quarterly value since Q3 2020 which saw S$181 million worth of transactions. 

Across districts, performance was uneven in terms of unit price on land area. Districts 1 and 2, as well as Districts 14 and 15, saw a fall in average prices quarter on quarter for both freehold and 999-year leasehold properties, while Districts 7 and 8 saw prices rise from the previous quarter. 

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Sales in prime districts such as Districts 1 and 2 remain limited, as fewer shophouses were put up for sale, said PropNex.

Market observations also suggest that a good number of deals, particularly those in the prime districts, were not caveated and of these deals, a “good portion” were purchased by foreigners and entities, they added.

District 8 (Little India and Golden Mile areas) once again posted the most transactions on a quarterly basis, with seven deals totalling nearly S$113 million. This accounted for 41 per cent of total sales value in Q1. Sales volumes in fringe districts such as District 8 are expected to remain high due to more units being put up for sale at more affordable entry prices, said PropNex. 

Shophouse rental activity, with 886 rental contracts signed in Q1, was slightly down from the 904 signed in the quarter before.

Nonetheless, total rent value in Q1 was a record high for quarterly value of contracts signed for the market at S$9.5 million. 

Rentals rose, with median rentals at S$5.98 per square foot (psf) per month, slightly higher than S$5.89 psf per month last quarter. Rentals are expected to rise further this year, with demand supported by tourism recovery and limited shophouse space available for rent, said PropNex. 

Investors are expected to remain keen on commercial shophouses as global investors look to safe haven assets amid economic uncertainties and projections of rental upside.

However, higher interest rates will probably moderate sales activity.