COE prices rise for most categories due to 3-week break, pent-up demand
CERTIFICATE of Entitlement (COE) prices for June’s first round of bidding have mostly increased, as a longer bidding period between COE rounds and a price drop in May’s second round spurred increased demand.
COE prices for Category A, which includes mainstream cars with engines up to 1,600 cc in capacity and with less than 97 kilowatts, rose 6.5 per cent or S$6,001 to S$98,001. Prices for Category B rose 6.8 per cent or S$7,668 to S$120,702. The category covers cars with engines more than 1,600 cc in capacity or with more than 97 kilowatts.
For commercial vehicles, which fall under Category C, COE prices increased 5.5 per cent or S$4,300 to S$81,801.
Prices for motorcycles, under Category D, rose 3.8 per cent or S$399 to S$11,001. Category E, the open category which can be used to register any motor vehicle except motorcycles, was the only category where COE prices fell – by 3.3 per cent or S$4,111 to S$120,889. June’s first round of COE bidding marks the second COE round since the Land Transport Authority (LTA) brought forward the deregistrations of about 6,000 non-extendable five-year COEs from Category A and B, beginning May 15. As a result, COE quotas have been higher since May’s second round.
The quota for Category A COEs was 518 in June’s first round, and 596 for May’s second round. In comparison, the quota was 474 in May’s first round, and 507 in April’s second round. Similarly, the quota for Category B COEs was 454 in June’s first round, and 480 in May’s second round, up from 410 in May’s first round and 430 in April’s second round. Automotive industry observers The Business Times (BT) spoke with indicated that the combination of a three-week break and the fact that COE prices fell in the preceding round caused prices to rise.
COE bidding is carried out on the first and third Mondays of every month, so there is typically a two-week break between bidding rounds. However, in months where the first Monday falls in the second week, as it did in June, there is a three-week break between rounds. That means there are more orders to clear and greater demand for COEs, so a price increase after a three-week break is common. Additionally, when COE prices are at high levels, the market can become intensely reactive as a result of pent-up demand and buyers waiting to replace cars nearing their COE’s 10-year lifespan.
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The general manager of a European car brand BT spoke to said: “I expected prices to increase this round. Firstly, with the longer period between bidding, it’s normal to see prices increase. Secondly, we all know there’s lots of pent-up demand, so even with the quota increase, buyers will react to the price drop and all rush to get orders in. It’s a knee-jerk reaction, which we’ve seen before often.”
They also pointed out that the opposite behaviour emerged in the COE price drop for Category E, after a new record of S$125,000 was set in the previous round.
The manager of an automobile financing company said: “When COE prices are at this level, those who really want or need a new car – and can’t wait for another month or two – will just sign for a deal whenever prices drop. That causes prices to rise again.”
See how COE premiums have fluctuated over the years with BT’s COE tracker.
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