THE IMPACTS OF SARS AND COVID-19 ON SINGAPORE'S PRIVATE RESIDENTIAL MARKET

Abstract

Motivated by the recent outbreak of COVID-19 around the world and its similarities with the 2003 SARS epidemic that affected many Asian cities, this paper aims to sieve out important lessons that Singapore’s private housing market has learnt from SARS which could help interpret the housing market’s response during COVID-19. Specifically, this paper attempts to determine if investors in Singapore’s private residential market managed to gain any insights from SARS that they later applied during COVID-19.

Based on existing research, housing market tends to react negatively to viral outbreaks. Similarly, SARS was found to exert a negative price effect on the housing market as prices declined by 5.5% during the outbreak period, which later rebounded by 1.8% in the remaining half of 2003 as markets returned back to normalcy. COVID-19, on the other hand, exhibits contrasting results as the pandemic had no statistically significant impact on the housing market in 2020 – suggesting that property purchases were based on fundamental housing attributes and were not influenced by COVID-19’s risks and uncertainties. These results were determined through a DID methodology that compares transaction records between a year before the outbreak and the outbreak year. To enhance the study’s robustness, the hedonic housing price model was used to construct a monthly quality-adjusted housing price indices wherein similar results were observed.

Henceforth, the findings suggest that the negative price effect of SARS in 2003 was consistent with viral outbreak’s impact on other countries’ housing markets. However, the 2003 outbreak also resulted in Singapore’s market to learn a viral outbreak’s impact on property prices. In which, investors learnt that Singapore’s housing market would eventually rebound to normalcy and thus there was no need to overreact during COVID-19 as the market remained resilient – resulting in its statistically insignificant price effects.