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COE Analysis July 2nd Round: The Rise Before The Fall?

July 2021 COE 2nd Tender

As Derryn explained in the last column, Certificate Of Entitlement (COE) prices are generally reactive. When prices go up, people hold off, and then it dips the next time round. And then people rush in and it goes up again, and so on and so forth. At least that’s how it’s been over the past few months anyway.

And so we’ve seen with the latest round of COE bidding in July, with premiums going up across the board. Category A, for ‘mainstream’ cars with engines up to 1.6-litres in capacity and with less than 130hp, saw prices go up to S$47,010, up from S$45,001 last time round.

Category B (i.e. the ‘luxury’ category, for cars with engines larger than 1.6-litres, or with more than 130hp), saw prices go up to S$59,501, up from S$56,100 previous.

Meanwhile, Category E, the Open Category for registering any type of vehicle except motorcycles but is almost always a proxy for Category B, saw an increase to S$60,001, up from S$57,700 from the previous round.

COE Prices for Singapore Feb to July 2021

Part of this can be attributed to the reactive factor that we’ve mentioned earlier. But of course, COE premiums can be affected by other factors too. Ultimately, COE is essentially a supply and demand system, and while demand is generally always going to be there, supply is regulated by the Government. Therefore, whatever the Government announces will be a huge determining factor in deciding where COE prices go.

As it is, the quota of COEs will be reduced for the next three months starting from August, and that has naturally resulted in punters rushing in to grab whatever they can right now, before supply decreases and COEs becomes harder to obtain. Basic economics dictate that limited supply plus strong demand equals higher prices.

That said, things are rarely as simple as that. As we’re writing this, Singapore is entering yet again into Phase 2 Heightened Alert (P2HA), with restrictions being imposed due to an alarming spike in Covid-19 cases over the past week. The country had just opened up for barely a couple of weeks before reimposing the measures, illustrating how quickly things can turn around in this volatile climate.

The last time Singapore entered P2HA, back in May, COE prices tumbled as consumer confidence ebbed away. It remains to be seen whether the situation will repeat itself, but Covid-19 has definitely complicated things for the market. After all, if the prevailing advice is to stay at home to avoid catching a nasty virus, buying a car might probably rank quite far down on your list of priorities.

That said, the next round of COE bidding is on 4 August, by which time the country would have had almost two weeks of being in P2HA, and the situation might have stabilised by then. More than likely though, the next round is expected to see a dip in premiums, and it’s probably just a matter of by how much. Part of it might be the aforementioned reactive factor, but it could also be a marker of how badly (or not) the pandemic has affected the car buying sentiment in Singapore.

This article was first published in Carbuyer.com.sg.

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