Surge in demand sees small-car COEs top price list

SINGAPORE — A rush into the market sent Certificate of Entitlement (COE) prices for small cars on a rebound at the close of the last bidding exercise today (Jan 20), with premiums now more expensive than those of bigger cars — a phenomenon not seen since December 2013.

A total of 3,437 bids were lodged for Category A (up to 1,600cc and 97kW) COEs, more than twice the supply available (1,659), pushing up prices by nearly 14 per cent to end at S$51,301.

Motor traders said the surge probably came from the major car shows  held in the period between today’s exercise and the last on Jan 6, which saw 2,013 bids. Yong Lee Seng Motor managing director Raymond Tang said the prevailing Cat A premiums — the lowest since May 2011 — drove up demand for small cars at these events. On top of this, there were also few new Category B models (above 1,600cc and 97kW) rolled out recently, he added.

The rise in Cat A premiums, however, did not take observers by surprise. SIM University adjunct associate professor Park Byung Joon said it was “obvious that (premiums) would become more expensive” after prices dipped to a near five-year low in the previous exercise. Dr Park felt the jump in prices was “a correction” to what was “an unexpected drop”, although he predicts a downward trajectory for the longer term, with prices hovering around S$45,000 in the later part of the year.

Singapore Vehicle Traders Association (SVTA) honorary secretary Jeremy Soh agreed, but pointed out that there might be occasional spikes along the way. He added that more buyers may still be waiting on the sidelines, in anticipation of lower premiums as the supply of COEs increases. Earlier this month, the Land Transport Authority (LTA) announced a bumper crop of COEs from next month until April. A total of 25,210 COEs — or 8,403 COEs a month — will be made available, up 16.4 per cent from the quota for November to this month. Although the next COE bidding exercise will come before the Chinese New Year period, which is traditionally favoured by some buyers as an auspicious time to make a purchase, observers said they are not expecting significant fluctuations in prices.

SIM University’s Dr Park said data from previous years show no “statistically significant” difference in COE prices during the Chinese New Year period. Save for premiums for goods-vehicles and buses, COEs for the other categories — B, D (motorcycles) and E (Open) — saw declines, with motorcycle premiums falling S$377 — or 5.4 per cent — to S$6,512 following two consecutive increases. This was likely due to motorcycle buyers holding off on their bids as they adopt a wait-and-see approach, given the 9 per cent increase in quotas expected from February to April, said motorcycle dealer A S Phoon’s director Wilson Phoon.