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What are the types of Shophouse preferred and who can buy it?

Commercial Shophouse

This type of Shophouse will 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, commercial 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. I will leave the part of finding a right paying tenant for another day. That will also be my job to help you shortlist.

Singaporeans, Permanent Residents (to check the date of PR) and even 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 indicated Pink in colour in the URA Master Plan. Buyers can use it for home stay at the ground floor 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 to the 1st Storey. 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 (to check the date being of PR) 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. This means Foreigners must do an extra step prior to acquisition and need to approval.

 

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 Holding costs is the 10% Annual Value (AV) of your property.

On top of this, you need to do maintenance on a fixed schedule and upfront miscellaneous costs if you are buying a worn-down unit where you need to get it ready to enjoy rental yield (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 30%, depending on the number of properties you already own. For more clarity, do allow me to explain to you when we meet up.

Foreigners if approved to buy, will need to pay 30% whereas Entities will pay 35% ABSD. Home Developers will pay additional 5% too.

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.

On top of this, you need to do maintenance on a fixed schedule and upfront miscellaneous costs if you are buying a worn-down unit where you need to get it ready to enjoy rental yield (case-by-case basis).

Buying this second type of Shophouse is more costly. So, is it still worth it?

 

How about the mixed Residential and Commercial type of Shophouse? This type of Shophouse indicated light blue in colour in the URA Master Plan. Zoning is temporary so Foreigner eligibility are subject to checking with 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?

 

Contact me today at 90098981 to discuss more!