City fringe shophouse along Serangoon Road for sale at S4.5m

image: CBRE

The city fringe shophouse market is getting popular among investors due to price and rental yield

CBRE today put up for sale a freehold two-storey conservation shophouse located at 616 Serangoon Road. CBRE is the exclusive marketing agent for city fringe shophouse and will conduct the sale through an Expression of Interest exercise which closes on 20 May 2021 at 3pm.

The shophouse’s strategic location along the bustling Serangoon Road indicates excellent visibility for the asset. Sitting on a freehold land of approximately 1,498 square feet, the two-storey shophouse has a gross floor area of approximately 2,419 square feet.

Under the Master Plan 2019, the site is zoned for “Commercial” use, with a gross plot ratio of 3.0 and is located within the Jalan Besar Secondary Settlement Conservation Area.

city fringe shophouse
image: CBRE

The guide price for the city fringe shophouse property is $4.5 million.

Mr Clemence Lee , Senior Director, Capital Markets, Singapore at CBRE, said, “With prices of CBD shophouses rising over the last few months, we are noticing that investors are increasingly diverting their attention to city fringe shophouses whose prices have yet to catch up but rental yields are comparatively higher.”

He added, “Given the palatable guide price and strong ongoing rejuvenation of Jalan Besar, we are confident that the property will draw strong interest from buyers who are looking to acquire a piece of heritage asset located along the prime Serangoon Road to capitalize on strong capital appreciation in the mid- to long-term.”

The ongoing rejuvenation has transformed the vicinity into a bustling city-fringe locale that offers a multitude of F&B and retail offerings. Notable commercial developments in the area include Centrium Square, Uptown @ Farrer, Tekka Place, City Square Mall and Aperia Mall. These are in addition to the availability of medical facilities, such as the newly renovated Kwong Wai Shu Hospital and upcoming Kallang Polyclinic.

Mr Lee added, “The shophouse is currently being used as an office. The successful buyer can explore converting the space into a gym/fitness centre or a restaurant to boost rental income, subject to approval from the relevant authorities. Also, the new owner can consider constructing a rear extension at the back of the shophouse to increase the built-up area of the asset, again, subject to approval from the relevant authorities.”

As this is a commercial property, foreigners are eligible to purchase the property. There is no Additional Buyer’s Stamp Duty (ABSD) or Seller’s Stamp Duty (SSD) imposed on the purchase of the property.

Mr Paul Ho, chief mortgage officer for iCompareLoan, said: “the city fringe shophouse at 616 Serangoon Road is attractive because it sits on a freehold site.

“But for buyers of the commercial property who need loan facility to complete the sale, they must be aware that many applications for commercial mortgage loans are delayed or rejected because buyers are not familiar with loan qualifications or of how to apply for such loans.”

Access to commercial mortgage loans is often hindered by unfamiliarity with loan qualifications, the lack the relevant financial knowledge and / or the resources to engage professional mortgage broker services to manage and address their obligations and financial liabilities as business owners. The terrain to apply and qualify for loans is also uneven because creditors are not just banks but finance companies and other licensed lending entities whose security arrangements may be different or more complicated.

When considering commercial mortgage loans, borrowers should seek out lenders who are willing to fund the loan under acceptable time constraints, keeping in mind their general creditworthiness. Borrowers should look at both bank and non-bank funding in order to get their needs met in a timely manner.

Asking questions and obtaining unbiased evaluations will reduce delay and frustration. Fortunately, new lenders have emerged to challenge banks on their traditional terms, so borrowers have more leverage now than ever before when seeking commercial loans.

Servicing your loan every month and seeing your bank balance taking a dip can be quite depressing. But what if you had a chance to lower your mortgage payment or even raise more funds on your property? When the window opens for an option to switch to another financial provider, it should be considered as it offers you an opportunity to get better terms from your previous loan. This is similar to refinancing for home loan.

This means that many owners of commercial properties are compelled to refinance every 2 years or else the interest cost will eat them alive. Commercial property includes retail, office, HDB shophouse, strata title shops, conservation shophouses, hotels, commercial buildings and mixed development.

If you hold a commercial property, you are likely running a business there or an investor – whether as an individual or under a corporation or investment holding company. Any decision would probably require you to do a cost-benefit analysis. The main reasons for refinancing or switching to a loan from another financial institution include raising cash, capitalizing on low interest rates to cut financing costs and a change in loan tenure.

Before buying a commercial or industrial property, make sure to determine whether you are buying to invest or for own use. The considerations are different.

There are many types of commercial properties such as (but not limited to the following):

  • Shophouse
  • Conservation properties
  • Offices
  • Retail shops
  • Office buildings
  • Hotels

The tenure of the property (based on the land) are typically:

  • 60 to 99 years
  • 999 and Freehold (rare)

The structures of these properties are:

  • Strata title
  • Individual land title

How to evaluate a commercial property?

  • Tenure of the property
  • Rental yield
  • Return of invested capital
  • GST registration (goods and services tax)
  • Calculation of property tax
  • Management fees
  • Interest rates of mortgage
  • Types of commercial property

You may buy the property as individual, using a corporation’s name, or using your company’s name largely depending on how you want to use it.

Written by Ravi Chandran

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