ASSET PRICE BUBBLES

Abstract

In the period lasting from 1993 to 1994, residential property prices in Singapore rose sharply, especially prices in the private property market. A concomitant phenomenon was that speculators began trading property at a rapid rate. Such a situation is not unlike the one in Japan in the late 1980s when there was a property price bubble which eventually burst. The main concern of this thesis will be with regards to the possibility of Singapore undergoing a similar burst of the price bubble. More specifically, I will examine the contributing factors that caused the asset price bubbles in both countries, and see if both the contributing factors are similar. As for the Singapore case, the possible contributing factors are tested to see if they are significant. Government policies are also taken into account to check if they were implemented to cool the overheating market so that we do not end up like the Japanese "bubble" economy.