Speculative Investment Drives Out Good Investment: Why it is Important to Minimize Speculative Investment of Real Estate in Singapore

Put in simple terms, a ‘bubble’ refers to financial assets (like stocks or land) whose price grows out of proportion from its ‘fundamental value’. Once the bubble bursts, the economy could fall into recession, and in the worst case scenario turns into an economic financial crisis. While most ASEAN economies suffered instantly from the burst of the crisis in 1997, mature economies, such as Singapore, Japan and the US, only suffered minor impacts at the time. Now, however, concerns are being raised as these mature economies have since experienced considerable economic slowdowns, most notably in Japan and Singapore, but also to a lesser extent in the US. It is plausible that bubble problems could reappear as future crises in these economies. This essay attempts to understand the anatomy of such bubbles and determine whether Singapore is prone to such a problem.