Singapore’s Government has taken a proactive stance to address the escalating premiums for Certificates of Entitlement (COEs) – a requisite for vehicle ownership in the city-state. As a response to record-high costs and supply imbalances, future COE quotas set for peak years 2026 and 2027 are being brought forward. This strategic move, announced by Acting Transport Minister Chee Hong Tat, aims to ease the current supply troughs while adhering to Singapore’s stringent zero-vehicle growth policy.
Interventions Amidst Rising Premiums
The supply boost is a calculated response to the spiraling COE premiums, which have reached unprecedented heights, particularly for cars and commercial vehicles. By increasing the COE supply in the upcoming quarters and leading into the peak years of 2026 and 2027, the Government anticipates a moderation in prices. However, Chee cautioned that market demand, a key factor influencing COE prices, remains beyond the Government’s direct control.
The ‘Cut and Fill’ Approach
Dubbed as the ‘cut and fill’ strategy, this initiative involves redistributing COE quotas from future peak years to address the present shortfall. In May, approximately 6,000 five-year car COEs were redistributed over several quarters from the next projected supply peak. Following its insufficient impact in curbing the strong demand and rising prices, the Land Transport Authority (LTA) recently announced the injection of an extra 1,614 COEs for cars and commercial vehicles between November and January 2024.
Industry Reception and Potential Impacts
Industry stakeholders have welcomed the move, perceiving the supply injection as more impactful than prior efforts. With the quotas for smaller and larger cars set to rise by 35%, and commercial vehicles by 65%, relative to the past quarter, there is cautious optimism about COE price moderation. However, Chee warns of potential trade-offs, including a short-term rise in vehicle numbers on the roads.
Measures to Mitigate Volatility
In a bid to reduce COE price volatility, several interventions have been enacted, including modifications to the COE quota calculations to minimize fluctuations. Despite these measures, the motorcycle category remains unchanged, with no plans to increase growth rates due to potential traffic congestion issues.
Conclusion
The debate in Parliament underscores the Government’s commitment to balancing supply-demand dynamics and keeping vehicle ownership costs in check. By borrowing COE quotas from future peak years, Singapore aims to mitigate the immediate challenges posed by record-high COE premiums. As the nation anticipates a significant rise in COE supply from the second half of 2024, reaching its zenith in 2026 and 2027, stakeholders remain watchful, hopeful for a more stabilized and affordable vehicle ownership landscape in Singapore.
Also learn about Singapore Ups COE Quota for November-January Quarter Amid Rising Demand.
