What are the types of Shophouse available and who can buy it?
This type of Shophouse is indicated Dark Blue in colour in the URA Master Plan. Used for commercial purposes, the Business type allowed are subject to approval by relevant authorities. It is common to see it used for Food and Beverage, offices, clinics, beauty centres, tuition centres, or even banks, backpacker’s hotel, recreation football clubs, subject to approval from the authorities.
Hence, this type of shophouse provides good tenant potential and it is a particularly worthwhile investment.
Singaporeans, Permanent Residents and Foreigners can buy Commercial Shophouses. Hence, it is pricey and most competed for by buyers (ultra-high net worth individuals, overseas business buyers, affluent investors alike)
Residential Shophouse with Commercial component first storey
This type of Shophouse is indicated Pink in colour in the URA Master Plan. Buyers can use it for home stay and the 1st Storey for Commercial use. Seeking permission from relevant authorities is compulsory for the use. Certain shophouse has an internal staircase, whereas others already have an external staircase access. Buyers may want to use the ground floor for commercial purposes instead which will require approvals. Hence, it is important to check what you are buying to avoid disappointment.
Singaporeans, Permanent Residents can buy Residential Shophouse with Commercial component first storey but Foreigners need to seek approval from the LDAU (Land Dealing approval Unit) because of residential zoning.
What are the costs involved?
For Commercial Shophouse, all Buyers (Singaporeans, PRs, Foreigners, entities) will need to pay the Buyer’s Stamp Duty (BSD) up to 3%. The Inland Revenue Authority of Singapore (IRAS) regulate this. Buyers are not subject to paying Seller’s stamp duty (SSD). Foreigners also do not need to pay Additional Buyer’s Stamp Duty (ABSD).
The Buyer also needs to do maintenance on a fixed schedule and prepare a budget for upfront miscellaneous costs if you are buying a worn-down unit (case-by-case basis).
For Residential Shophouse with Commercial component first storey, all Buyers (Singaporeans, PRs, Foreigners, entities) will need to pay the Buyer’s Stamp Duty (BSD) up to 4% for Residential component and up to 3% for commercial component. Buyers will also pay Additional Buyer’s Stamp Duty (ABSD). In the case of Singaporean buyer, you will be exempt from ABSD if it is your first residential property. Otherwise, ABSD applies. For PRs, you will be subject to 5% to 35%, depending on the number of properties you already own.
Foreigners if approved to buy, will need to pay 60% whereas Entities will pay 65% ABSD.
All Buyers are also subject to paying Seller’s stamp duty (SSD) if you sell within 3 years.
The Holding costs is the 10% to 20% Annual Value (AV) of your property. Take note that this rate will increase to range from 12% to 36% by 2024.
How about the mixed Residential and Commercial type of Shophouse? This type of Shophouse is indicated light blue in colour in the URA Master Plan. Zoning is temporary so Foreigner eligibility is subjected to approval from the Authorities.
The holding costs is similar to the Residential with commercial first storey.
Okay, now that we have covered the Why and What, do check out my next article on How to select a shophouse for investment?
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