Big car COEs fall below S$40k for first time in over 5 years

SINGAPORE – Certificate of Entitlement (COE) premiums fell across the board yesterday, with premiums for big cars seeing the sharpest fall of more than S$11,000 to reach S$38,610 — the lowest in more than five years.

In the final bidding exercise before Chinese New Year, premiums for small cars fell to S$46,651, down 9.1 per cent from S$51,301.

For the Open Category, which can be used for any vehicle type but ends up being used mainly for cars, prices fell 13.7 per cent to S$44,001 from S$51,000.

Motorcycle premiums closed at S$6,503, down marginally from S$6,512. A total of 6,144 bids were received, with a quota of 4,232 COEs available.

The previous exercise about two weeks ago — which received 6,286 bids in total for 3,614 COEs — saw COE premiums for Category A cars (cars up to 1,600cc and 97kW) outstripping those for Category B (cars above 1600cc or 97kW) for the first time since Dec 2013.

Transport analysts said they had expected premiums to fall, but they were taken aback by the extent of the dip, in particular the premiums for big cars, which fell almost 23 per cent from S$50,089. The previous low was S$35,909 in July 2010.

National University of Singapore transport researcher Lee Der-Horng said he was surprised by the difference between the Cat B and Open Cat premiums, which was typically small. For example, the difference in the previous exercise was about S$1,000. This time, however, it was S$5,391.

The uncertain economy could have weighed on the minds of prospective car buyers who would be concerned about the economic outlook and their personal finances, he said.

“The economy is getting cloudy. It will definitely affect the willingness (to buy a car),” he added.

While car showrooms are typically crowded when Chinese New Year approaches, SIM University adjunct associate professor Park Byung Joon noted that based on historical data, there has been “no significant pattern” for COE premiums for this period.

Adding that premiums for Cat A cars have been falling since the start of this year, he said he expects overall premiums to continue to head south for the rest of the year as more cars get de-registered.

From this month to April, a total of 25,210 COEs — or 8,403 COEs a month — will be available. This is 16.4 per cent higher than the quota for November to last month.

Analysts had previously noted that under the COE system, demand is stimulated whenever premiums fall. UniSIM senior lecturer Walter Theseira reiterated that it would be difficult for COE prices to fall for extended periods “unless car demand itself is very weak”.

“The bumper crop of COEs almost entirely comes from de-registrations, because new vehicle growth is virtually frozen,” he said. “That means there is a large pool of potential buyers who have scrapped, or will soon scrap, their cars. If the majority of those scrapping their cars decide to buy a replacement, COE prices may not fall appreciably.”