Guide to Investing in Shophouses in Singapore
- kabikescor890d
- Jun 7
- 4 min read
Singapore’s real estate market offers a wide range of investment options, and shophouses have emerged as a standout asset class. With their historical charm, limited supply, and growing demand, shophouses are attracting savvy investors who want something unique with long-term value.
If you're considering shophouse investment in Singapore, this guide will walk you through everything you need to know—from what shophouses are to key legal and financial considerations.
🏛 What Is a Shophouse?
A shophouse is a heritage building typically built between the 1840s and the 1960s. These structures feature a commercial unit on the ground floor and a residential space on the upper floors. They are usually located in historic neighborhoods like Chinatown, Tanjong Pagar, Joo Chiat, and Kampong Glam.
Due to their unique design and cultural significance, many shophouses are conserved under URA (Urban Redevelopment Authority) regulations. This means they can't be demolished or heavily modified, adding to their exclusivity.
💡 Why Invest in Shophouses?
1. Limited Supply
Only a few thousand conserved shophouses exist in Singapore. With no new developments allowed, their scarcity drives up value over time.
2. Strong Rental Yield
Shophouses in prime districts enjoy high rental demand, especially from boutique offices, cafes, F&B outlets, and co-working spaces. Dual-use potential (commercial + residential) further enhances rental yield.
3. Capital Appreciation
Many shophouses have seen prices double or triple over a decade. Their architectural beauty and strategic locations make them attractive to both local and foreign investors.
4. Heritage Appeal
Investors often view shophouses not just as financial assets but as a part of Singapore’s living history. This gives emotional and cultural value beyond the numbers.
📍 Prime Locations for Shophouse Investment
Not all shophouses are equal—location is key.
Chinatown: Highly sought-after for retail and dining businesses.
Little India: Offers cultural vibrance and strong foot traffic.
Tanjong Pagar: A commercial hotspot near the CBD.
Joo Chiat/Katong: Great for boutique businesses, cafes, and yoga studios.
Bugis/Kampong Glam: Perfect blend of tradition and tourism appeal.
⚖️ Freehold vs Leasehold Shophouses
Freehold
Offers lifetime ownership
Preferred by investors looking for long-term capital preservation
Commands premium prices
Leasehold (99 years)
Lower entry price
Suitable for short-to-medium term investment
Can still enjoy rental income and appreciation, depending on location and balance lease
🧾 Key Things to Consider Before Buying
1. Zoning and Usage
Check URA's zoning to see if it's commercial, residential, or mixed-use. This affects both rental opportunities and renovation permissions.
2. Conservation Status
If it's a conserved shophouse, you must retain its façade. Renovation approvals can be strict and must comply with URA guidelines.
3. Tenancy Agreements
Check if the property comes with existing tenants. It may offer immediate rental returns or come with constraints if you want to repurpose the space.
4. Maintenance and Upkeep
Shophouses are old and may require significant renovation or upkeep. Budget for structural, electrical, and plumbing upgrades.
💰 Financial Considerations
Buyer’s Stamp Duty (BSD)
Applicable based on purchase price:
1% on first $180,000
2% on next $180,000
3% on next $640,000
4%-5% on the remainder (depending on value)
Additional Buyer’s Stamp Duty (ABSD)
If the property is zoned as residential, foreigners and entities may be subject to ABSD (up to 60%).
However, commercially-zoned shophouses are exempt from ABSD, making them more attractive to foreign investors.
Loan-to-Value (LTV) Ratio
If purchasing under a company name, the LTV is typically capped at 50%. For individuals, it depends on the number of outstanding loans and income.
📋 Legal and Regulatory Aspects
Ownership RestrictionsForeigners can buy commercial-zoned shophouses without approval from LDAU. But residential-zoned ones may need approval.
Renovation RulesAny external modifications require URA approval. Internal works have more flexibility but must respect structural integrity.
GSTIf the seller is a GST-registered entity and the buyer is not, GST (8%) may be charged on the transaction.
🏢 Who Typically Invests in Shophouses?
High-net-worth individuals (HNWIs) seeking asset diversification
Family offices looking for intergenerational assets
Corporate investors creating flagship retail or F&B outlets
Boutique funds and REITs focused on heritage properties
📈 Recent Market Trends
Transaction volume has been rising post-COVID, driven by limited new supply.
Some shophouses in Districts 1 and 2 have seen prices rise by 15–20% year-on-year.
Interest from overseas investors (especially from China, Hong Kong) is increasing due to Singapore’s political and economic stability.
📦 Summary: Pros and Cons
Pros | Cons |
Rare and limited asset | High upfront costs |
High rental yields | Costly maintenance |
Strong appreciation potential | Regulatory restrictions |
ABSD exemption for commercial units | Complex purchase process for foreigners |
✅ Final Thoughts
Shophouses offer a unique blend of historical charm and investment potential. They’re not just buildings—they’re legacy assets. Whether you’re looking for rental income, capital appreciation, or a culturally meaningful property, shophouses in Singapore could be the perfect fit.
However, due to the complexity and costs involved, working with a property lawyer and an experienced agent is highly recommended.
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