COE prices rise across the board

Certificate of Entitlement premiums increased across the board in the second bidding exercise for September.

This was the first bidding exercise since the government recently tweaked the COE system, introducing a new criterion for Category A cars. From February next year, cars in that category must not have an engine power of more than 130bhp.

At the end of the tender on Wednesday, the COE price for small cars closed at S$83,751 - an increase of S$6,447.

The premium for big cars ended at S$86,239 - up by S$9,139, the biggest rise in the tender.

Open Category COEs, which can be used for any vehicle type but end up mainly for cars, rose S$7,001 to close at S$87,001.

For commercial vehicles, the COE prices inched up by S$2,002 to close at S$76,001.

COEs for motorcycles ended at S$1,703, an increase of S$43.

Industry watchers had expected COE prices to go up after the government tweaked the system last week.

However, what surprised them was the extent of the increase.

COE premiums for bigger cars surged by nearly 12 per cent.

Raymond Tang, honorary secretary of the Singapore Vehicle Traders Association, said: "After February, Cat B will have a big group of cars going in there... from Cat A. So, most of the people are worried that will cause the COE of Cat B to be overcrowded."

COE prices for smaller cars went up by more than 8 per cent.

Car dealers noted that these prices are inching closer to record highs seen earlier this year.

Ron Lim, general manager of Tan Chong Motor, said: "A lot of people are buying into the story that the COE will go up with this tweak. In a way, it is a self-fulfilling prophecy.

“People are rushing in, but with today's rise, hopefully consumers will take a step back and try to digest the situation and ask themselves whether it is a rational thing to do, to rush in like that.

“We are all trending near record high numbers, does it actually make sense or not is a good question."

Industry experts said that whether or not COE prices will continue to soar depends on the amount of car stock left from car dealers affected by the changes. It also depends on how much consumers can digest such price increases.

Car traders still expect car showrooms to continue to be packed in the months ahead.

However, they cautioned that if COE prices are being driven up so high now, a more drastic correction will be needed later.

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Like clockwork, COE rocketed after the latest bidding since revealing the new ruling. The rush for the cars definitely inflicted this balloon, and the higher it will go if the rush doesn't subside. It will come to a point where consumers are finally finding it hard to swallow the inflation and start to back out, but that is unlikely.

With the CNY coming in less than 4-months' time, the hot period for car purchase is just round the corner. This will further add fuel to the fire and dealers are already expecting COE to hit above S$100k before February.