COE prices set to rise as supply dips
Premiums may hit $100k when new quota period starts in Feb: Analysts
By: Christopher Tan
CAR buyers should brace themselves for the prices of certificates of entitlement (COEs) to rise further, even hitting $100,000, as COE availability shrinks further.
Supply will fall by as much as 15 per cent when the new quota period starts next month, according to Land Transport Authority figures released yesterday.
They show the monthly COE supply for cars up to 1,600cc declining by 15.1 per cent to 667, while that for cars above 1,600cc falling by 13.7 per cent to 605.
In the Open category, used almost exclusively by car buyers, the supply will dip 1.9 per cent to 476 a month.
In total, there will be 11.4 per cent fewer COEs for car buyers in the next six months.
The new quota takes into account a lower growth rate allowed for Singapore's vehicle population. At 0.5 per cent a year, it is half the previous rate of 1 per cent and one-third the 1.5 per cent preceding that. Before 2009, the rate was 3 per cent.
The COE supply also takes into account the number of vehicles deregistered. As a result, commercial vehicle and motorcycle buyers will get more COEs in the next six months.
But for cars, deregistrations have been low, and industry players do not see a big change in the first half. So, they expect premiums to hit $100,000 shortly, as they now already hover between $92,000 and $96,000.
Said VW Singapore general manager of sales Daniel Chong: "There is definitely a risk that COE premiums will continue to climb because the demand for new cars... is likely to remain strong throughout this year."
Even when premiums exceed $100,000, drivers may just decide between buying a car with a smaller or bigger engine, said Mr Andre Roy, chief executive of Wearnes Automotive.
Noting that the premium gap between Category A (cars up to 1,600cc) and B (cars above 1,600cc) has closed considerably, he asked: "At what point will people just opt for bigger engines?"
While premiums will rise in the longer term, "there will be months when they will fall to maybe $80,000-plus", said Singapore Vehicle Traders Association secretary Raymond Tang.
But National University of Singapore transport researcher Lee Der-Horng sees the COE premium for cars up to 1,600cc - already at a record $92,100 - continuing to rise because demand will remain strong.
Things are unlikely to change in the second half. Besides deregistrations not picking up much, the Government will also resume its clawback of oversupplied
COEs in the second half.
But relief should arrive next year, when supply is expected to soar on the back of a deluge of deregistrations.
With an eye on this possibility, business development executive Danny Goh, 52, is keeping his nine-year-old Lexus ES300 until then. "Maybe the property cooling measures will help lower car demand too," he said.
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