SINGAPORE: Before the Certificate of Entitlement (COE) bidding exercise was suspended in April 2020 due to the 'circuit breaker' imposed back then, prices for some of the categories were at levels that would not be seen again since. In March that year, COE premiums for small cars (up to 1,600cc and 9
SINGAPORE: Before the Certificate of Entitlement bidding exercise was suspended in April 2020 due to the"circuit breaker" imposed back then, prices for some of the categories were at levels that would not be seen again since.
The 31-year-old had bought a second-hand Honda Stream in 2017 near the end of its COE's 10-year validity, and so had to renew the certificate at the end of 2018.cars like his were at about S$32,000. However, he had been juggling part-time work with his studies back then, and so did not have sufficient savings to foot the cost of the entire COE.
“Being a parent, sometimes you will have four bags, one stroller and a kid to carry while using your phone to navigate.” He had thus looked into buying either a second-hand car or an “entry-level” car, but as COE prices rose further and further, Mr Yap is now undecided whether it’s worth getting one. 26-year-old Russell Yap, who is a research assistant at Nanyang Technological University and lives in Changi, said that he had considered buying a car as he finds it inconvenient to use public transport for the commute from his home in the eastern end of Singapore to NTU in the western end.
This latest change would “further reduce the quarter-on-quarter volatility of COE supply”, the LTA had said.last year, when LTA announced that from the month after that, it would use a calculation method to take into account the rolling average of two quarters instead of one. Generally, the 10-year validity of a COE means that vehicles get scrapped after a decade of use, leading to an increase in quotas and falling COE prices mostly in 10-year cycles.
However, from his observation on the ground, the limited quota of cars is going mostly to those who have the money to buy them, rather than those who need the vehicles the most, such as Mr Tan and his young family. He added that while the COE system’s Category A was initially meant for smaller and more affordable cars, this has lost its purpose in recent times, as morehave launched car models that qualify for Category A COEs.
Singapore used to have two more COE categories for cars, including one for small cars below 1,000cc. But the four categories were merged into the current two in 1999 to remove distortions that could arise from the small number of COEs in the previous small-car and luxury-car categories. For instance, he argued that the 10-year validity, along with the five- or 10-year extension option, will mean that vehicle renewals will happen only at the 10-, 15- or 20-year mark for most vehicles.
“What needs to happen over the entire 10-year cycle is to smooth out COE supply properly across the years, otherwise, you have no real impact on the trend because the low COE era continues for years at a time, not just months,” he said. “Singaporeans have a very emotional attachment to cars, not just as a form of transport, but as a status symbol,” said the 31-year-old.
“If you amortise the S$70,000 over a 10-year period for a new car, to the average Singaporean, it is S$7,000 a year, and in their head, they can afford it,” he said. He is looking to buy a new car by then, but said that his decision will be heavily influenced by the price of the COE at that point, which he hopes will come down.
While the COE system is intended mainly to control the car population rather than to make cars affordable, some young Singaporeans feel that the system should also not work against those who need cars the most. Prof Png said that while the Electronic Road Pricing system seeks to control usage, it could be improved. He noted that the authorities had planned to introduce a satellite-based ERP system, but that it had been continually delayed.for at least one-and-a-half years owing to the worsening global shortage of microchips.
And while some may see their vehicles as a status symbol, others are also keen to do their part to “save the environment by not driving”, he added. But how feasible are the proposals, some of which had been mooted some years back and have resurfaced amid the spotlight on the record COE prices? He added that the effectiveness of the policy would depend on how many such owners exist in the market.Suggestion #2: Ensuring each family has no more than one car
Assoc Prof Ong said that such a policy will be difficult to implement, as it would be challenging to make a distinction between those who are deserving of the rebate and those who are not, and the rebate amount itself. Overall, Assoc Prof Theseira from SUSS said that suggestions #1 to #3 are ineffective, as they hinge upon the identity of the buyer, and any benefits gained from them can easily be abused.
Suggestion #5: Instead of dividing into categories, let COE be a percentage of the open market value of the car. For instance, if a wealthy buyer is willing to bid for a COE of over three times the open market value for a S$300,000 luxury car, the average buyer who wants to buy a cheaper car with an open market value of S$30,000 will still have to pay close to or over S$100,000 for their COE.
The main usage measure was the Area Licensing Scheme which began in 1975 to limit traffic in the central business district, and eventually evolved into the Electronic Road Pricing system. Under this system, each motorist or motor dealer, who wants to own a car or other vehicle would have to bid for a COE for that category of vehicle.
The COE can be renewed for a further five or 10 years by paying the prevailing quota premium if the car owner decides to keep the vehicle for more than 10 years. The open system enables bidders to monitor current COE prices and ensure that the final quota premiums reflect the true value bidders have placed on the COEs.
Mr Loo, the car dealer, said that the categorisation of Category A and Category B is"no longer relevant" as there would be buyers of higher-end car models purchasing cars in Category A, which he believes should be meant for more affordable models. He added that even if the classification was refined and done by car brand instead, this would also be unfeasible, as most brands produce a range of cars to cater to a diverse consumer profile.
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