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  • Writer's pictureGIGI WANG

Can Foreigners Invest In Commercial Shophouses In Singapore?

Updated: Oct 22, 2023

Shophouses in Singapore have been making headlines in Asia for the last couple years, with prices soaring as high as S$7,800 psf for a 999-year commercial shophouse in Q1 2023, located in Singapore's Central Business District. A very common question asked is, can foreigners buy commercial shophouses in Singapore and the answer is, yes! Foreigners can purchase commercial shophouses in Singapore without needing approval under the Residential Property Act. This includes shophouses that are used for commercial purposes. However, if the shophouse is for non-commercial use, a foreign person would need to seek approval under the Residential Property Act.

Foreign investors may ask themselves, what are the benefits of investing their money in Singapore by buying a commercial shophouse? Below are several benefits for investors:

  • Potential for Rental Income: Commercial shophouses often generate rental income from businesses that lease the space. Singapore's stable economy and business-friendly environment can attract tenants, providing a consistent stream of rental income.

  • Capital Appreciation: Singapore's real estate market has historically shown appreciation in property values over time. This can potentially lead to capital gains for shophouse owners if they choose to sell the property in the future.

  • Diversification of Investment Portfolio: Owning a commercial shophouse can diversify an investor's portfolio, spreading risk across different asset classes. Real estate investments can provide a hedge against stock market volatility.

  • Tangible Asset: Shophouses are tangible assets that investors can see and touch, which can provide a sense of security and stability.

  • Potential for Business Use: Depending on zoning regulations and property characteristics, some investors may use the shophouse for their own business operations, reducing the need for separate commercial rental expenses.

  • Heritage and Character: Many commercial shophouses in Singapore are located in historic areas with unique architectural features. Owning such a property can have a cultural or heritage appeal.

  • Favorable Location: Shophouses are often situated in prime and central locations, offering convenient access to amenities, transportation, and a potentially large customer base. An example of a favourable location for Shophouse investors is on the Singapore River Front, along Boat Quay. A recent sale transaction in Q1 2023 at 52 Boat Quay, “Considering that shophouses in the Boat Quay precinct are typically tightly held, it is extremely rare for a riverfront-facing property to be available for sale. This shophouse was an excellent opportunity for my long-standing client to acquire this charming flagship property in the heart of the CBD" Yap Hui Yee from Savillis Singapore informed Edgeprop.

  • Potential Tax Benefits: Singapore has a relatively favorable tax environment for property investors, with no capital gains tax and a progressive property tax system.

  • Wealth Preservation: Real estate investments can serve as a means of preserving wealth, especially in countries with strong property rights and a stable legal system like Singapore.

  • Loan Opportunities: If needed, investors can leverage their commercial shophouse investment by securing loans using the property as collateral.

While there are clear benefits to owning a commercial shophouse in Singapore, it's essential to conduct thorough due diligence, understand the local market dynamics, and consider factors like maintenance costs and property management. Additionally, the performance of any real estate investment can vary based on economic conditions, market trends, and individual circumstances, so it's advisable to consult with financial advisors and real estate professionals before making such an investment.

Which areas of Singapore can you find commercial shophouses?

Commercial shophouses in Singapore can be found in various areas across the island. Here are some of the areas where commercial shophouses are commonly located:

Chinatown: Chinatown is known for its historic shophouses, and it's a popular area for both tourists and locals. You can find a wide range of businesses, from restaurants and cafes to boutiques and souvenir shops.

Tanjong Pagar/Duxton Hill/Keong Saik/Bukit Pasoah: This area near Tanjong Pagar has a cluster of beautifully restored shophouses that are home to upscale boutique stores, hair salons, fitness studios, restaurants and bars.

Shophouse, Tras Street, Tanjong Pagar
Tras Street, Tanjong Pagar

Everton Park: Located near the Central Business District (CBD), Everton Park is home to a mix of residential and commercial shophouses, often housing trendy cafes and small businesses.

Telok Ayer: Located in the Central Business District, Telok Ayer is known for its historic shophouses that house a variety of offices, restaurants, bars, and businesses.

Boat Quay/Circular Road/Hong Kong Street: Boat Quay is located on the Singapore River waterfront with plenty of restaurants and bars that provide out door refreshment areas facing the river. Circular Road and Hong Street is known for its historic shophouses that house a variety of offices, restaurants, bars, and businesses.

Boat Quay, Singapore, Shophouse
Boat Quay, Singapore

Tiong Bahru: Tiong Bahru is one of Singapore's oldest housing estates, and it features charming Art Deco-style shophouses that have been repurposed into hip cafes, boutiques, and bookstores.

Little India: Little India is another neighborhood in Singapore with a rich heritage of shophouses. Here, you'll find a mix of businesses selling Indian textiles, spices, clothing, and food.

Kampong Glam/Haji Lane/Arab Street: Kampong Glam is known for its Malay and Arab heritage. Shophouses in this area often house unique shops, eateries, and cultural institutions. Beautiful murals decorate the external walls of these heritage shophouses, a well known painter of these murals is local artist Yip Yeow. Mr. Yeow recently completed a mural "covering the entire side wall of the shophouse, the mural depicts what life was like in Kampong Glam in the past" says Yp Yeow located at 92 Arab Street on August 12, 2023 (it took him 1 month under the heat and sun). These narrow lanes in the Kampong Glam area are known for their vibrant street art and quirky shophouses that host independent boutiques, vintage shops, and trendy cafes.

East Coast Road/Joo Chiat/Katong: Located in the East of the island, East Coast Road is lined with housing a mix of traditional Peranakan and other eateries, as well as shops selling traditional Peranakan items. The Joo Chiat area is famous for many clothing and craft boutique shops as well as a variety of restaurants, cafes, and fitness studios.

Joo Chiat Road, East Coast, Shophouse
Joo Chiat Road, East Coast

Serangoon Road: In addition to Little India, Serangoon Road has shophouses that cater to various businesses, including jewelry stores, textile shops, and eateries.

What is the process for obtaining approval to purchase a commercial shophouse as a foreigner in Singapore?

As a foreigner wishing to purchase a commercial shophouse in Singapore, you are not required to seek approval under the Residential Property Act. Commercial properties, including shophouses for commercial use, can be purchased without approval. However, there are certain criteria and documents you need to fulfill and submit when purchasing a shop from the open market. These include:

1. You must be 21 years and above at the date of application.

2. If the sellers/buyers are undischarged bankrupts, the consent of the Official Assignee is needed for the resale.

3. You need to provide photocopies of buyers’ NRIC, latest business registration record from the Accounting & Corporate Regulatory Authority, and other relevant documents.

Please note that if you require financing loans, you should make the necessary financing arrangements by obtaining in-principle approval for a mortgage loan from the bank, as well as to prepare the deposit. The deposit ranges from 5% to 10% of the successful bid price, depending on the terms of the Conditions of Sale.

It's also recommended to engage a conveyancing lawyer to review the auction documents on your behalf to ensure that you fully understand the legal implications arising from the purchase of a property at the auction. Tip: Remember to check for any amendments to the Conditions of Sale before the auction commences.

Are there any additional fees or taxes associated with purchasing a commercial shophouse as a foreigner?

As a foreigner purchasing a commercial shophouse in Singapore, you will need to consider the following costs:

1. Buyer's Stamp Duty (BSD): This is a tax on dutiable documents relating to any immovable property in Singapore. The rates for non-residential properties are tiered and based on the purchase price or market value of the property, whichever is higher.

2. Goods and Services Tax (GST): If the seller of the commercial shophouse is GST-registered, you will be required to pay GST on the purchase.

3. Legal Fees: If you engage a lawyer, you will need to pay for their services. The fees can vary depending on the complexity of the transaction and the lawyer's rates.

4. Property Tax: This is a tax levied on all properties in Singapore, based on the Annual Value (AV) of the property. For non-owner-occupied properties, the tax rates are tiered and based on the AV.

Please note that as a foreigner, you are allowed to purchase commercial properties in Singapore without any approval under the Residential Property Act. However, if you are considering to use the shophouse for non-commercial use, you may need to seek approval.

Are there any specific sectors or industries that offer tax breaks or exemptions for foreign investors?

Yes, Singapore offers several tax incentives and exemptions to attract foreign investors. These incentives are not specific to any industry but are generally available to all sectors, including real estate. Some of these incentives include:

1. Pioneer Incentive: This provides tax exemption or concessionary tax rate on income derived from qualifying activities for a specified period.

2. Development and Expansion Incentive: This offers a concessionary tax rate on incremental income from qualifying activities.

3. Investment Allowance: This provides a tax allowance on approved capital expenditure incurred for qualifying projects or activities.

4. Double Tax Deduction for Internationalisation: This allows 200% tax deduction on eligible expenses for international market expansion and investment development activities.

5. Tax Deduction for Research and Development Expenditure: This allows 150% tax deduction for staff costs and consumables incurred on qualifying research and development activities.

6. Land Intensification Allowance: This provides an initial allowance and an annual allowance on qualifying capital expenditure incurred for the construction or renovation of a qualifying building or structure.

However, these incentives are subject to terms and conditions, and the approval of the relevant authorities. It is recommended to seek professional advice or consult with the Inland Revenue Authority of Singapore (IRAS) for more detailed information.

Contact Gigi Wang at +65 8820 3988 or email if you are looking to invest in a commercial shophouse.

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