SINGAPORE: Certificate of Entitlement (COE) premiums closed lower in all categories in the latest bidding exercise on Wednesday (Nov 8), with Category B premiums dropping by S$40,000 (US$29,500).
Premiums for all car categories hit new highs in the last bidding exercise, however, premiums for Category B – for larger and more powerful cars – dropped by 26.7 per cent to S$110,001 from S$150,001.
Open Category COEs, which can be used for any vehicle type but end up being used mainly for large cars, also saw a significant drop, with premiums falling by 20.9 per cent to S$125,011 from S$158,004.
For Category A cars, or those 1,600cc and below with horsepower not exceeding 130bhp, premiums closed at S$95,689, down from S$106,000 in the last exercise.
COEs for commercial vehicles, which include goods vehicles and buses, fell to S$78,001 from S$84,790 in the previous bidding exercise.
Motorcycle premiums closed at S$10,889, down from S$11,201 in the last exercise.
A total of 3,133 bids were received, with a quota of 2,411 COEs available.
The Land Transport Authority (LTA) announced last week that the COE quota for the November 2023 to January 2024 quarter would be increased further.
An additional 1,614 Category A, B and C COEs were reallocated, on top of the 1,895 reallocated COEs announced last month.
This brought the total supply of COEs for the quarter to 14,388.
Analysts said the sharp drop in COE premiums was due to short notice of the additional quota, with the market unable to react in time.
However, they cautioned that the drop is likely a short-term outcome, with more buyers now expected to flock to showrooms because of the lower prices.
“As a result of this sharp drop in COE premiums, the car dealer market will start adjusting their package prices downwards. We’re likely going to see more orders being made because of this,” Singapore University of Social Sciences (SUSS) Associate Professor of Economics Walter Theseira told CNA938.
“I think COE prices will likely be volatile for a while – perhaps for the next couple of rounds. As the market adjusts, this drop may not be sustained.”
Related:
COE quota upped again for quarter starting in November
More COE quota will be brought forward from peak years in 'cut-and-fill' move to tackle supply trough
Car leasing companies 'unlikely' to be the main factor for rising COE prices: Transport Ministry
The Transport Ministry announced in May that it would bring forward quota from “guaranteed deregistrations” in peak years, which has helped to increase COE supply over the last six months.
Speaking in parliament on Monday, Acting Minister for Transport Chee Hong Tat said that more COEs would be brought forward from peak years to fill current supply troughs while maintaining Singapore’s zero-vehicle growth policy.
The zero-growth policy, implemented to manage traffic congestion, means that the number of COEs available for bidding is based on the number of deregistered vehicles.
Addressing questions from Members of Parliament about rising COE prices, Mr Chee noted that the large difference in quotas during the peak and trough years results in higher volatility in prices across different years, assuming demand remains relatively constant.
Under the current system, the moving average of deregistrations in the four preceding quarters is used to compute COE quotas for the next quarter.
“A better outcome can be achieved for all stakeholders, while still allowing the COE system to play its role as an allocation mechanism, if we can reduce the peak-to-trough ratio by using a ‘cut-and-fill’ approach to shave off future peaks and using this supply to fill the current troughs,” Mr Chee said.