ABSTRACT
The goal of this book is to clarify the role of real estate in the Asian crisis of 1997, its contributions to that crisis, and problems that arise in the aftermath. In any economy, there are three main classes of assets powering growth: First and foremost, there is human capital as the most critical factor, even if it remains difficult to measure. Then there is the broad range of income-producing real estate assets. Third, there are financial assets. Initial analyses of the Asian crisis have focused on financial assets, foreign exchange markets, and corporate behavior, because global financial markets powered the crisis and financial systems also play a central role in domestic resource allocation. The impact in the sharp changes in the value of real estate which is a larger asset class than financial assets in Asia has remained largely unevaluated. This study of real estate behavior in eight very different Asian economies fills a gap in our understanding. One of the early conclusions of the lively debates on the crisis has been that Asian economies were excessively dependent on traditional banking. The underdevelopment of organized debt and equity markets did not allow these economies to diversify risks and improve governance. Nor did they provide alternative funding channels when the crisis broke out, thereby removing chances to prevent it. This concluding chapter now addresses three main questions. When did macroeconomic mismanagement lead to severe real estate problems? What role did potential “unholy alliances” (Litan 1992) between these dominant banking systems and real estate markets play across Asia? Much of Asia is still faced with more waves of urbanization; how can real estate markets be strengthened and their volatility reduced?
