Singapore has attracted foreign investors due to its stable political climate, strategic location in Southeast Asia, and lucrative real estate market. In fact, data from the Urban Redevelopment Authority (URA) reveals that foreign buyers accounted for an impressive 22.4% of total condominium sales in 2022, highlighting the strong appeal of Singapore’s property sector. Among these buyers, Chinese investors dominate the condominium market.
Aside from condominiums and other properties, conservation shophouses have become a popular investment option for foreigners. The question now arises: Can a foreigner purchase a shophouse in Singapore? The following blog explains foreign ownership regulations for investing in these fascinating structures.
Shophouses as Investments for Foreigners
Shophouses possess rich historical significance, showcasing Singapore’s architectural heritage with intricate designs and a distinctive blend of traditional and colonial influences. These prized structures, preserved for their cultural legacy, attract foreign investors seeking long-term investments.
Their prime locations in bustling commercial hubs and vibrant residential areas also ensure a steady stream of tenants and buyers. With easy access to amenities and thriving business centres, shophouses are highly sought-after properties on the real estate market.
Moreover, their versatility allows various uses to cater to evolving market demands. From retail spaces to eateries, boutique hotels, and co-working spaces, shophouses provide a range of investment opportunities.
Property Ownership Restrictions for Foreign Buyers
So, can a foreigner buy a shophouse in Singapore? The answer is yes—with some necessary approvals and eligibility criteria. The good news is this: while there are restrictions on foreign ownership of landed properties, shophouses are generally classified as commercial properties, offering more favourable regulations for foreign buyers.
Let’s delve into the specifics to understand this further. In Singapore, foreign buyers face limitations when buying landed properties, such as bungalows, on the mainland. They are usually restricted to buying landed properties only in Sentosa Cove.
However, they can seek permission from the Singapore Land Authority (SLA) to acquire landed properties on the mainland. This opens up avenues for foreign investors to explore the enticing world of shophouses and participate in Singapore’s vibrant real estate market.
About Foreign Ownership of Shophouses
When owning shophouses, it’s essential to understand the nuances based on their classification: commercial, residential, or mixed commercial-residential. The ownership of commercial shophouses is not restricted, making them accessible to anyone, including foreigners.
However, residential shophouses fall under landed properties and have specific regulations. According to the Residential Property Act, only Singaporeans can buy conservation shophouses with “residential” components. Foreigners must obtain special approval from the Singapore Land Authority (SLA) to acquire residential shophouses.
Similarly, PRs must also obtain approval from the Land Dealings Approval Unit (LDAU) before purchasing such properties. Residential shophouses are categorised to highlight their significance and legal protection.
Foreign buyers are also restricted from acquiring shophouses designated for residential and commercial purposes. However, they can still appeal to the SLA for special permission in such cases.
Stamp Duty Considerations for Shophouse Investments
The increase in Additional Buyer’s Stamp Duty (ABSD) rates for residential properties in 2018 has prompted investors, especially foreign investors, to explore alternative investment opportunities such as commercial shophouses. Unlike residential properties, commercial shophouses are not subject to the same level of stamp duty. This makes them an attractive option for foreign investors in the island’s real estate market.
However, it’s imperative to note that not all shophouses are considered commercial properties. Investors should not assume that ABSD, which applies to residential properties, does not apply to shophouses.
In the case of shophouses part of mixed-use buildings, Buyer’s Stamp Duty may be payable. The ABSD application depends on the stamp duty profile of the purchaser, with ABSD potentially applicable to the residential component and BSD applying to the non-residential component.
For standalone shophouses, a careful review of the URA Master Plan zoning is crucial to determine the relevant Buyer’s Stamp Duty and the potential for Additional Buyer’s Stamp Duty. It is advisable to seek assistance from a professional valuer to assess specific sections of the property accurately. Being mindful of these stamp duty considerations ensures an informed approach to investing in shophouses in Singapore.
How to Choose a Shophouse for Investment
Now that you know whether foreigners can buy shophouses in Singapore, it’s time to embark on your investment journey. However, investing in shophouses can be complex as it requires careful consideration of various factors.
One crucial aspect to consider is the location of the shophouse you intend to purchase. Location plays a significant role in rental yields and growth potential. Shophouses in vibrant heritage districts tend to offer higher rental income and better prospects for capital appreciation.
To identify promising investment opportunities, conduct thorough market research, stay informed about local trends, and seek expert advice.
Due Diligence Checklist When Buying Singapore Shophouses
A savvy property investor must go through critical due diligence checkpoints before purchasing a shophouse. Some of these include:
• Tenure
• Stamp duty
• Zoning
• Encroachments
• Conserved or non-conserved
• Land size and gross floor area
• Number of storeys with or without an attic
By following these checkpoints, you can ensure you have thoroughly evaluated the legal, financial, and market aspects of shophouse investing. This comprehensive approach helps to minimise risks, enhance decision-making, and increase the likelihood of profitable investments.
Why Engage Professional Services When Investing in Shophouses?
Throughout the shophouse purchasing process, it is advisable to seek professional services to ensure a smooth and compliant transaction. A licensed agent can assist you in property searches, negotiate on your behalf, and guide you through due diligence. Furthermore, you may consult lawyers and tax advisors familiar with Singapore’s real estate regulations to comply with the law.
Key Takeaway
Since shophouses have demonstrated high value and resilience as property assets over time, they appeal to property buyers (local and foreign) seeking defensive assets. Foreigners can buy shophouses in Singapore, but specific rules and approval requirements apply, especially in unique cases (such as purchasing a mixed-use shophouse).
Conduct thorough research and evaluate multiple investment prospects to make informed selections when buying shophouses. Also, arm yourself with adequate knowledge of the legislation, meet eligibility conditions, and seek professional help.
Find the Right Shophouse Investment with Shophouse Collective!
Our team at Shophouse Collective aims to simplify shophouse buying by offering tailored guidance and unmatched market knowledge. We would be happy to answer any additional questions regarding whether a foreigner can buy a shophouse in Singapore. Don’t hesitate to get in touch with us at +65 9888 2882 or .
