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12-12-2010, 06:15 AM
Basically, cars were never cheap in Singapore and will never be!
Dec 12, 2010
COE prices could ease in future
Even if supply stays modest, likely rise in vehicle usage costs will cut demand
By Christopher Tan, Senior Correspondent
If you have a car, pamper it with premium oils, send it for regular maintenance, rotate those tyres and invest in a reliable grooming service.
With certificate of entitlement (COE) supplies having dwindled drastically this year (and premium levels more than doubling those from a year ago), changing cars has become quite prohibitive.
Next year's COE quota is expected to shrivel further. In fact, calculations point to fewer than 40,000 certificates being made available - the smallest number since the vehicle quota system started in 1990.
In all likelihood, COE premiums, which have moved past $40,000 for cars up to 1,600cc and $60,000 for bigger models, could touch $65,000 and $75,000 respectively by the second half of next year.
Barring the freak levels seen in 1994, when premiums breached $100,000 twice, $65,000 and $75,000 would be close to the highest prices recorded in normal times.
And these estimates are conservative, based on a 20 per cent quota cut that would shrink supply to fewer than 40,000 pieces. (This year, COE prices have just about doubled from those last year following a one-third reduction in quota.)
The upshot of next year's quota cut? A 1.6-litre Japanese family sedan could cost more than $100,000, and a Korean equivalent, over $80,000. Even the cheapest Chinese car - the Chery QQ - would be around $75,000 (it was about $33,000 in 2006).
So car owners are expected to hold on to their current vehicles, especially if these are relatively new. Even those with vehicles that are nearing 10 years in age might do the economically sensible thing and revalidate their COEs, so they can keep their carriages for another five or 10 years.
Younger people who do not own a car but have been eyeing one might have to rein in their aspirations. Being saddled with a $100,000 loan shortly after joining the workforce is an unenviable proposition - especially when the loan is not for a flat but a 10-year lease on a Toyota.
Buying second-hand is one option, but because used car prices follow new car rates closely, these models won't be all that cheap either - unless the car in question is very old.
Is this to be the lot for car buyers from now on? Or is the COE famine part of a cyclical trend?
There are two schools of thought.
The first says COE supply should start to rise from 2012, when a sizeable cohort of vehicles registered during the boom years of 2004 to 2008 become old enough to scrap. (COE supply hinges largely on the number of cars taken off the road.) More than 520,000 cars were registered during that five-year period.
The second school of thought says the high COE prices will force many owners to hang on to their vehicles, even if the paintwork has lost some of its lustre.
Both are probably right. Even if supply starts to rise, it is unlikely to return to levels recorded in the overheated years of 2004 to 2008. This is because the Government could adjust the allowable annual growth rate for the vehicle population. The rate was halved to 1.5 per cent two years ago, and will be reviewed after next year.
In my opinion, COE supply could reach a steady state of between 50,000 and 80,000 a year from 2015 or so.
By then, several new MRT lines will be ready, including the Circle Line, the Tuas Extension, and the Downtown Line Stages 1 and 2.
Commuting by train will then become significantly more convenient for more residents than is the case today - and possibly more comfortable because of the increased capacity that the new lines will bring.
Round about the same time, a new Electronic Road Pricing system based on satellite tracking could be up. It will be able to charge drivers for the distance they cover, on top of when and where they drive. Coverage will not be limited by physical gantries, so the system could literally go islandwide.
Also, parking charges will creep up as developers are no longer required to set aside as many carpark spaces as before.
Chances are, usage costs for motorists will rise substantially.
These developments should in some ways reduce Singapore's seemingly insatiable appetite for cars.
If so, the pressure on COE prices will not be as great as it has been - even if supply is relatively modest.
christan@sph.com.sg
Dec 12, 2010
COE prices could ease in future
Even if supply stays modest, likely rise in vehicle usage costs will cut demand
By Christopher Tan, Senior Correspondent
If you have a car, pamper it with premium oils, send it for regular maintenance, rotate those tyres and invest in a reliable grooming service.
With certificate of entitlement (COE) supplies having dwindled drastically this year (and premium levels more than doubling those from a year ago), changing cars has become quite prohibitive.
Next year's COE quota is expected to shrivel further. In fact, calculations point to fewer than 40,000 certificates being made available - the smallest number since the vehicle quota system started in 1990.
In all likelihood, COE premiums, which have moved past $40,000 for cars up to 1,600cc and $60,000 for bigger models, could touch $65,000 and $75,000 respectively by the second half of next year.
Barring the freak levels seen in 1994, when premiums breached $100,000 twice, $65,000 and $75,000 would be close to the highest prices recorded in normal times.
And these estimates are conservative, based on a 20 per cent quota cut that would shrink supply to fewer than 40,000 pieces. (This year, COE prices have just about doubled from those last year following a one-third reduction in quota.)
The upshot of next year's quota cut? A 1.6-litre Japanese family sedan could cost more than $100,000, and a Korean equivalent, over $80,000. Even the cheapest Chinese car - the Chery QQ - would be around $75,000 (it was about $33,000 in 2006).
So car owners are expected to hold on to their current vehicles, especially if these are relatively new. Even those with vehicles that are nearing 10 years in age might do the economically sensible thing and revalidate their COEs, so they can keep their carriages for another five or 10 years.
Younger people who do not own a car but have been eyeing one might have to rein in their aspirations. Being saddled with a $100,000 loan shortly after joining the workforce is an unenviable proposition - especially when the loan is not for a flat but a 10-year lease on a Toyota.
Buying second-hand is one option, but because used car prices follow new car rates closely, these models won't be all that cheap either - unless the car in question is very old.
Is this to be the lot for car buyers from now on? Or is the COE famine part of a cyclical trend?
There are two schools of thought.
The first says COE supply should start to rise from 2012, when a sizeable cohort of vehicles registered during the boom years of 2004 to 2008 become old enough to scrap. (COE supply hinges largely on the number of cars taken off the road.) More than 520,000 cars were registered during that five-year period.
The second school of thought says the high COE prices will force many owners to hang on to their vehicles, even if the paintwork has lost some of its lustre.
Both are probably right. Even if supply starts to rise, it is unlikely to return to levels recorded in the overheated years of 2004 to 2008. This is because the Government could adjust the allowable annual growth rate for the vehicle population. The rate was halved to 1.5 per cent two years ago, and will be reviewed after next year.
In my opinion, COE supply could reach a steady state of between 50,000 and 80,000 a year from 2015 or so.
By then, several new MRT lines will be ready, including the Circle Line, the Tuas Extension, and the Downtown Line Stages 1 and 2.
Commuting by train will then become significantly more convenient for more residents than is the case today - and possibly more comfortable because of the increased capacity that the new lines will bring.
Round about the same time, a new Electronic Road Pricing system based on satellite tracking could be up. It will be able to charge drivers for the distance they cover, on top of when and where they drive. Coverage will not be limited by physical gantries, so the system could literally go islandwide.
Also, parking charges will creep up as developers are no longer required to set aside as many carpark spaces as before.
Chances are, usage costs for motorists will rise substantially.
These developments should in some ways reduce Singapore's seemingly insatiable appetite for cars.
If so, the pressure on COE prices will not be as great as it has been - even if supply is relatively modest.
christan@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
