When will car COE prices fall significantly? Experts think it is more than a year away [TEST AL]
![When will car COE prices fall significantly? Experts think it is more than a year away [TEST AL]](https://onecms-dev-res.cloudinary.com/image/upload/s--iZ5usfHz--/c_fill,g_auto,h_468,w_830/f_auto,q_auto/v1/mediacorp/cna/image/2023/08/08/istock-1161334806.jpg?itok=KDyMnO_I "When will car COE prices fall significantly? Experts think it is more than a year away [TEST AL]")
10-YEAR CYCLE
Market watchers estimate that COE quotas will start to increase around late 2024 because of the 10-year cycle in supply, and prices will then drop. Each COE is valid for 10 years, and people in Singapore generally keep their cars registered for close to the lifespan of their COE, explained Assoc Prof Walter Theseira of the Singapore University of Social Sciences (SUSS). When a car is deregistered, the COE goes back on the market. “Whatever supply of COEs are issued 10 years ago, (is) an extremely good predictor of the COEs that will be issued today,” Assoc Prof Theseira told CNA previously. “Looking back 10 years, the COE supply only improves towards the end of 2014, so it's not reasonable to expect that COE supply will improve significantly before late in 2024,” he said at the time.COE quotas for Category A were below 400 per bidding exercise from February 2013 to April 2014, before increasing to more than 700 in November 2014.
In May 2015, there were more than 1,400 COEs available, and the supply remained above 1,000 per bidding exercise for the next four years.
Category B COEs follow a similar trend, with quotas increasing gradually from May 2014 and rising more quickly from February 2015 onward. More than 1,000 quotas are available in each bidding exercise from August 2015 to January 2020.
Based on this historical 10-year cycle, COE quotas are likely to begin to rise from the middle of 2024, said Mr Yeo Swee Guan, a management associate at Motorist Singapore.
"With some time lag in the market for prices to reflect the new levels of demand and supply, one can expect to see a meaningful fall in COE prices from late 2024 onwards," he said.
SUPPLY VERSUS PRICE
COE premiums are affected by both demand and supply, but supply is easier to predict, said Assoc Prof Theseira of SUSS.
“Prices historically have tended to fall during high COE supply periods, and the same is expected during the next high COE supply cycle,” said the transport economist.
COE QUOTA VS PRICES
Category A quota increased and stayed high between mid-2014 and 2020, and premiums were on a downward trend for most of that time period.
For Category B, COE supply also climbed from May 2014 and stayed above 1,000 from August 2015 to January 2020. Prices started to slip in late 2013.
There may be fluctuations, but in the long run, when quotas increase and remain high, prices come down.
“Within that broad fact, there is a lot of variation auction to auction, but it is also clear that the average prices during the high COE supply years are much lower than the average prices during low COE supply years,” Assoc Prof Theseira said.
The Land Transport Authority (LTA) announced a one-time adjustment in May that will boost COE supply this year.
Even then, the total number of COEs available from August to October is 11,019. Over six biddings, Category A will have 3,785 certificates and Category B will have 2,816 COEs.
That is a small number compared with high COE supply years.
For example, from November 2018 to January 2019, there were a total of 30,143 quotas, including 10,894 for Category A and 7,414 for Category B. In those months, Category A prices were under S$30,000 and Category B premiums were under S$35,000.
HOW FAR WILL PRICES FALL?
Beyond supply, there are other factors affecting COE prices and how much they fall, experts said.
Singapore’s transport system, land use and travel behaviour affect demand for private cars, Assoc Prof Theseira said.
“When people live, work, and play in ways that benefit greatly from private car ownership, demand for cars goes up. If their needs can be met by public transport better, then car demand falls,” he said.
For example, condominiums used to be built to be accessible by private cars, but today, many developments are integrated with public transport or are close to bus and train stations, he said.
Additionally, Mr Yeo of Motorist Singapore said demand could rise if consumers can easily get loans at good rates, and policy tweaks could affect demand or supply. He cited the zero-car growth policy and the recategorization of cars with higher engine power into Category B in February 2014.
Both Mr Yeo and Assoc Prof Theseira agreed that prices were unlikely to fall to lows seen in previous years.
“With demand for COEs consistently outstripping supply, and rising household incomes enabling consumers to be more willing to spend on cars, it would stand to reason that COE prices will not fall to prices that Singaporeans have been used to in the past,” said Mr Yeo.
