Chris Tan: Car prices to head south soon

[Mustank]

http://motoring.asiaone.com/Motoring/News/...914-299419.html

 

Opinion: Car prices to head south soon

 

By Christopher Tan

 

At the time of writing, the COE for cars up to 1600cc was at $48,801, and the COE for cars above 1600cc was $70,890. The Open COE, a proxy for the latter, was $70,117.

 

Around the same time last year, they were between $30,000 and $43,000. And as recently as three years ago, the same premiums were mostly around $15,000 or less. With the COE supply staying tight for the rest of the year, the chances of a crash are as far-fetched as you finding a bikini babe on Pluto.

 

The world economy and stock markets are faltering, you say? Well, history has shown that the Singapore car market can be pretty resistant to socio-economic influences.

 

The single biggest determinant of prices has always been the number of entitlement certificates in the system. And the current supply is merely a quarter of what they were in the bountiful years of the mid-2000s.

 

Yes, if consumer sentiment is dampened by the sorry state of the world's former economic powerhouses (which, if you ask me, have not really recovered from the 2008-2009 financial meltdown), people's appetite for shiny new cars will weaken. But this won't make COE premiums nose-dive. At most, you might witness prices stabilise after a soft landing.

 

If a recession hits and persists, and employers wield the axe on salaries and headcounts, then all bets are off. But even then, we might not see premiums see-sawing like they did during the Asian financial crisis of 1997-98, because of the limited quantities of COEs currently. And unlike that period, "taxi participation" is a major factor today.

 

This is because there are many more cab companies as well as a larger population of taxis - both fuelling a demand for COEs. On top of that, the human population in Singapore has also increased significantly.

 

Next >> When will prices fall?

 

 

So, when will COE prices fall back down to below $20,000? Will they ever? The short answer is probably - and sooner than you think.

 

Again, this has to do with COE supply, which will start to rise as the enormous cohort of cars registered during the COE boom years of 2003-2008 come of age and are scrapped. (COE supply is determined largely by the number of vehicles taken off the road.)

 

 

Scrapping bonanza

 

If you look at the age profile of passenger cars on the road today, you will get a pretty good idea of when this scrapping bonanza will start to happen. The first wave is likely to take place between mid-2013 and early-2014.

 

The next wave - a bigger one - will be in 2015. And by 2016, we should see COE supply reaching tsunami scale. This will be followed by a couple more years of sizeable quotas before supply starts to shrink yet again.

 

Barring a fundamental change to the way COE supply is determined, car buyers and sellers will continue to experience a feast-and-famine situation. COE premiums and corresponding new car prices will continue to fluctuate from year to year.

 

The savvy consumer should align himself or herself to this cycle which, if you'd notice, makes a full circle once every 10 years.

 

Got a comment? Send it to christan@sph.com.sg

 

Christopher Tan is the contributing editor of Torque magazine by SPH Magazines. This month's issue is on sale. Check out more stories at Torque online, www.torque.com.sg

 

 

[Aspri]

The biggest unknown is whether if the government will release the quota back to the market or not, 5 years from now.

[Piyopico]

They have to unless they wanna flip prata.

 

If people cannot afford cars then MIW will get less votes in the next GE. Dun tink this is one prata they will flip.

[Hermitage]

  On 9/16/2011 at 5:42 AM, Aspri said:

The biggest unknown is whether if the government will release the quota back to the market or not, 5 years from now.

 

"Barring a fundamental change to the way COE supply is determined..."

 

Yeah, the writer said so himself. If the determining factor changes, then all bets are off... :angry:

 

But we can always hope...

[Raymondism]

  On 9/16/2011 at 5:49 AM, Hermitage said:

"Barring a fundamental change to the way COE supply is determined..."

 

Yeah, the writer said so himself. If the determining factor changes, then all bets are off... :angry:

 

But we can always hope...

 

good.. i bought an 05 altis....

i can change in 2013 to 2015.. very gd..

[Yc2005]

Currently the vehicle growth rate is at 1.5% (IIRC). In anticipation of the bonanza, LTA may just adjust the growth rate to 0% then to -1.5%, -3%.... Or better yet, they may come out with a new policy altogether which will more or less maintain the quotas steady. Afterall, our roads are overcrowded so it will be a good time to keep growth in check

[Darryn]

What will add to the glut of COEs - everyone buying a car NOW will have a huge incentive to deregister their car when the price of the COE drops. This will lead even more deregistrations.

 

If the policy doesn't change it may even arise that the whole car population changes in the space of 3 years - which the govt also doesn't want.

 

If I were them, I would change the policy to "smooth" the price a bit.

[SimonTan]

Rules can change.

If the car dealers are not about to ramp up their car orders, then the huge release of COE in 2013 onwards might be a case of got Coe but no car to register!

After consulting with experts, LTA may slowly release the huge bonanza and spread it evenly!

The same thing LTA did when they decided to cut the quota due this year, LTA announced that it will spread out the sudden drop in quota over one year to avoid shock to the system.

 

 

[Celicar]

This guy is assuming that all cars will be scrapped at year 10, in which case his chart applies. If they are scrapped earlier, then the POSSIBILITY of more COEs will come sooner, provided the government keeps pegging COEs to cars taken off the road. But I think 1 factor that he has identified needs to be taken into account - cab companies will be competing so I think COEs will not fall to the levels previously seen.

[Good-Carbuyer]

  On 9/16/2011 at 5:40 AM, Mustank said:

http://motoring.asiaone.com/Motoring/News/...914-299419.html

 

Opinion: Car prices to head south soon

 

By Christopher Tan

 

At the time of writing, the COE for cars up to 1600cc was at $48,801, and the COE for cars above 1600cc was $70,890. The Open COE, a proxy for the latter, was $70,117.

 

Around the same time last year, they were between $30,000 and $43,000. And as recently as three years ago, the same premiums were mostly around $15,000 or less. With the COE supply staying tight for the rest of the year, the chances of a crash are as far-fetched as you finding a bikini babe on Pluto.

 

The world economy and stock markets are faltering, you say? Well, history has shown that the Singapore car market can be pretty resistant to socio-economic influences.

 

The single biggest determinant of prices has always been the number of entitlement certificates in the system. And the current supply is merely a quarter of what they were in the bountiful years of the mid-2000s.

 

Yes, if consumer sentiment is dampened by the sorry state of the world's former economic powerhouses (which, if you ask me, have not really recovered from the 2008-2009 financial meltdown), people's appetite for shiny new cars will weaken. But this won't make COE premiums nose-dive. At most, you might witness prices stabilise after a soft landing.

 

If a recession hits and persists, and employers wield the axe on salaries and headcounts, then all bets are off. But even then, we might not see premiums see-sawing like they did during the Asian financial crisis of 1997-98, because of the limited quantities of COEs currently. And unlike that period, "taxi participation" is a major factor today.

 

This is because there are many more cab companies as well as a larger population of taxis - both fuelling a demand for COEs. On top of that, the human population in Singapore has also increased significantly.

 

Next >> When will prices fall?

 

 

So, when will COE prices fall back down to below $20,000? Will they ever? The short answer is probably - and sooner than you think.

 

Again, this has to do with COE supply, which will start to rise as the enormous cohort of cars registered during the COE boom years of 2003-2008 come of age and are scrapped. (COE supply is determined largely by the number of vehicles taken off the road.)

 

 

 

Scrapping bonanza

 

If you look at the age profile of passenger cars on the road today, you will get a pretty good idea of when this scrapping bonanza will start to happen. The first wave is likely to take place between mid-2013 and early-2014.

 

The next wave - a bigger one - will be in 2015. And by 2016, we should see COE supply reaching tsunami scale. This will be followed by a couple more years of sizeable quotas before supply starts to shrink yet again.

 

Barring a fundamental change to the way COE supply is determined, car buyers and sellers will continue to experience a feast-and-famine situation. COE premiums and corresponding new car prices will continue to fluctuate from year to year.

 

The savvy consumer should align himself or herself to this cycle which, if you'd notice, makes a full circle once every 10 years.

 

Got a comment? Send it to christan@sph.com.sg

 

Christopher Tan is the contributing editor of Torque magazine by SPH Magazines. This month's issue is on sale. Check out more stories at Torque online, www.torque.com.sg

Subject to GE result then?

[Thunder7890]

Ha Ha,this only apply to people like you who own a car but not to the rest of Sporean. They still in a win win situation my friend.

[Raymondism]

  On 9/16/2011 at 6:02 AM, SimonTan said:

Rules can change.

If the car dealers are not about to ramp up their car orders, then the huge release of COE in 2013 onwards might be a case of got Coe but no car to register!

After consulting with experts, LTA may slowly release the huge bonanza and spread it evenly!

The same thing LTA did when they decided to cut the quota due this year, LTA announced that it will spread out the sudden drop in quota over one year to avoid shock to the system.

 

nvm i hv 2013 to 2015 to play with...

they can do whatever they want.. demand and supply relationship will change anyway

[Raymondism]

wonder who will startblaming the government....

[Pokyman]

i thought the plan was to have negative growth to reduce the no of cars on the road... if that is so ... than prices might not fall after all

[Raymondism]

  On 9/16/2011 at 6:08 AM, Pokyman said:

i thought the plan was to have negative growth to reduce the no of cars on the road... if that is so ... than prices might not fall after all

 

shld increase the price some more to hv the desired effect...

 

[Piyopico]

  On 9/16/2011 at 6:05 AM, Thunder7890 said:

Ha Ha,this only apply to people like you who own a car but not to the rest of Sporean. They still in a win win situation my friend.

 

 

Not true. Many people aspire to own a car. If prices are sky high, even a family earning $10,000 a month will not be able to afford a car. If you make this group that comprises 80% of the populace so unhappy, do you think MIW will be popular?

 

Edited September 16, 2011 by Piyopico

[Kyrios]

wah good then I can laugh at my 2 snooty neighbours who bought new mercs during the SKA-SKC period...they have been looking down on the rest of the naybors' 'cheap' cars...

 

Then those who bought at cheap times..always buy at cheap times..those who bot expensive will always buy at the expensive period..

 

any his prediction stlill 2-3 years away..lots can happen..

Edited September 16, 2011 by Kyrios

[Raymondism]

  On 9/16/2011 at 6:16 AM, Kyrios said:

wah good then I can laugh at my 2 snooty neighbours who bought new mercs during the SKA-SKC period...they have been looking down on the rest of the 'cheap' cars...

 

The those who bought at cheap times..always buy at cheap times..those who expensive will always buy at the expensive period..

 

any his prediction stlill 2-3 years away..lots can happen..

 

not true...

can always sell now and change to 2nd hand car.. (from yr 05 or 06)

 

government never say must buy new car...