IMPACT OF THE ASIAN ECONOMIC CRISIS ON THE PRIVATE RESIDENTIAL MARKET

Abstract

Since Thailand decided to float the Thai baht on 2 July 1997 (an event marked as the start of the economic crisis), we have witnessed a downward spiralling trend in asset values in the private residential property sector of Singapore. Slightly more than a year before this crisis (in May 1996), prices have already dropped following the government's implementation of a package of anti - speculation curbs. This study analyses the private residential property price index compiled by the Urban Redevelopment Authority (URA) based on two time periods. These comprise the May 1996 curbs on local properties and the external shock resulting from the July 1997 currency crisis. Statistical tests show that the economic crisis has aggravated the price decline and its impact is more pronounced than an internal shock in the form of government intervention. Tests results further reveal that the impact on prices of private residential properties is uniform irrespective of type and location. A personal survey conducted by the author reveals that about two thirds of the respondents are the HDB upgraders searching for low-end properties. Majority felt that prices will bottom out by mid-1999 but they expect the economy to take a longer time to recover. 78% percent of the total respondents already had the intention to purchase before the economic crisis. The intention to purchase became stronger for this response group after the economic crisis.