Big drop in COEs, premiums go DOWN.


FROM next month, there will be a bigger-than-expected cut in certificates of entitlement (COEs) needed to buy vehicles.

With almost 30 per cent fewer COEs available each month, car traders foresee premiums rising soon to between $30,000 and $35,000, from around $25,000 now.

The biggest reduction of close to 40 per cent will be for COEs for cars up to 1,600cc, the mainstay of car buyers.

The reduction is the result of a new formula unveiled yesterday in Parliament to determine the number of new vehicles allowed.

It will be based on the actual number of vehicles taken off the road, and not a forecast of vehicles to be deregistered over 12 months.

With the new formula, as well as adjustments for an oversupply of about 17,000 COEs in the last two years, the monthly supply from April to July will plunge to 4,238.

Source: here

Yada yada. expected decrease in the number of COEs issued after 5 long years of making the same mistake over and over again. 5 years of chasing after the market. 5 years of misjudging demand and supply which caused the number of cars in Singapore to shoot up, creating the massive jams we have now. The investment in ERP gantries may have been caused by those mistakes too. But those mistakes made cars affordable, and we have one now. 🙂 If those mistakes were corrected earlier, the situation that we are facing now may not have even appeared in the first place.

The above is just a rant, not my main point for this post.

Reading the newspapers (offline & online), the line (implied or direct) keeps popping up, ‘But with the changes, the number of COEs is likely to be reduced, which means car prices may go up.’ This may not be true now. With so many cars already on the road, and with prices of cars already quite high, who in the right mind will purchase a car now. Even if the number of certificates allowed for bidding is reduced tremendously, prices should not shoot up that drastically. Based on observation and current market conditions, demand of cars is quite low, with people avoiding the showrooms.

To me, one of the reason that prices increase is when customers fearing a bleak COE future, rushes to get a new car to replace their not-so-new one that is still functioning well. Because of that, dealers get cold feet and start bidding aggressively to ensure that all their customers get their cars asap.

Why do reports like to infer that car prices will shoot up? Isn’t that self-fulfilling prophesy? Why not look at it at another angle? Report that facts without providing hints that prices will go up. You should try that one day, unless, unless you all have the ultimate aim of seeing that car prices increase dramatically.

Advice for all wannabe car owners or owners looking to change their cars within the next few months, stay away from all showrooms and let the market stabilise. Don’t add fuel to the madly fluctuating COE prices.

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