The Impact of Housing Credit on Personal Bankruptcy

We use a linked housing transaction dataset and a personal bankruptcy dataset to study the impact of housing credit on personal bankruptcy in Singapore. Using a difference-in-differences (DD) approach, we find that an increase in housing credit increases the monthly instalment by 560-900 Singapore dollar, and increases the likelihood of personal bankruptcy by 0.15-0.22 percentage points for house buyers who have more exposure to the housing credit increase. To investigate the mechanisms, we show that the observed effect is unlikely to be driven by the composition effect and selection of irresponsible buyers. The effect is mainly due to the increasing debt burden. We also apply a regression discontinuity design and find that those who bought houses within 6 months after the policy are 0.43 percentage points more likely to declare personal bankruptcy