SARS & The Singapore Property Market
- An Opinion Paper
By Knight Frank Pte Ltd
Consultancy & Research
7 May 2003

Introduction

At the beginning of 2003, Singapore's economic outlook was mainly clouded by the impending Iraq war and its impact in oil prices. While the war in Iraq has ended, and oil prices have fallen, the Severe Acute Respiratory Syndrome (SARS) is now putting a strain on the economy and created a new and greater uncertainty.

SARS first broke out in March this year. When it quickly became clear that this was a totally new epidemiological phenomenon, the government moved quickly and decisively to designate Tan Tock Seng Hospital as the SARS hospital, and channeled all non-SARS medical cases to the other public hospitals. Schools were then closed for almost 3 weeks to check the spread of this infectious disease. The government served Home Quarantine Orders (HQO's) on suspected cases. The popular Pasir Panjang Wholesale Market was closed after SARS cases emerged there. It was re-opened some 2 weeks later. Some 2,000 were quarantined as a result. The government also moved to amend the Infectious Diseases Act in record time. The Act conferred sweeping powers on the public health authorities, restricting families of SARS-related deaths from conducting funeral wakes, imposing hefty fines and other sentences for breach of HQO's, etc.

The government has announced that new SARS cases have tapered off and no new infections occurred in the hospitals. The open, speedy and comprehensive way in which the outbreak was tackled has also earned the praise of the international business community and the WHO.

Source: Ministry of Health (www.moh.gov.sg/sars)

Source: Ministry of Health (www.moh.gov.sg/sars)

Economic Impact of SARS

As at 3 May 2003, Asia accounted for 5,798 (96%) SARS cases with a fatality rate of about 6.8%. Singapore, with 203 SARS cases and 25 deaths, had the third highest number of cases. While the public health authorities tackled the medical dimensions of the disease, there was clearly recognition that the psychological impact from the disease was equally, if not more devastating, than the disease itself, especially through its effects on the economy. Indeed, as Prime Minister Goh Chok Tong said, "If SARS doesn't kill us, SARS will kill the economy."

Initially, the disease severely affected the transport, retail, and tourist trades, recently only recovering from the aftermath of the Iraqi conflict and a weak global economy. Shopping centres, restaurants and eateries, airlines and transport companies reported sharp drops in patronage. Tourist and business travel shrunk. Business confidence evaporated on account of the fears of contracting the disease from public contact.

Most Asia countries have revised downward expectations of their countries' economic growth for the year. SARS is likely to depress Asia's growth by 0.1 to 0.2 percentage points in 2003. Economic growth for East Asia as a whole is expected to slow to 5.6 percent in 2003 from 6.5 percent last year. Southeast Asia is unlikely to achieve its expected gross domestic product (GDP) growth of 4 percent this year. Like other countries, Ministry of Trade and Industry (MTI) in Singapore has lowered the GDP growth forecast for this year from 2% - 5% to 0.5% - 2.5%, assuming that the outbreak does not spread worldwide and become a global pandemic.

Singapore's travel and tourism industry - which accounts for 5% of Singapore's GDP -- suffered a 60% plunge in visitors' arrivals in April. The slump is estimated to shrink the economy's output by 3% or $4.8 billion. This sharp fall in inbound visitors has caused average hotel occupancy rate to fall to 20% - 30%; significantly below the average occupancy rates of 74% in December 2002. Sales at retail outlets have declined by 10% to 50%. Revenues at some restaurants have halved. Taxi drivers are carrying fewer passengers and earning less. A number of events and conventions scheduled in April and May this year have been cancelled or postponed. The unemployment rate is expected to increase beyond the 4.2% in December 2002.

So far, manufacturing, which accounts for a big share of GDP, has not been hit. But if SARS situation deteriorates in the region or in the major industrial countries, it will affect our export markets and important trading partners. It could shake global confidence, and production levels and new investment.

Recognising that failure to deal decisively with this outbreak will undermine confidence in Singapore's economy, the government in April announced two sets of measures as part of a "national response to SARS." Property tax rebates, compensation to quarantined individuals and companies, etc. were introduced to provide some relief for affected businesses. Various other steps have been taken to restore confidence - campaigns to clean wet markets, public toilets and food centres, Singapore Tourism Board's $2m "Step Out" promotion, daily temperature taking routines on cab drivers, school children, and government offices, etc.

These efforts have begun to bear fruit, as crowds begin to return to shopping centres and eating houses. More tellingly, there are few images of a mask-wearing public in contrast to scenes in some other parts of Asia.

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