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Will COE Prices Drop During A Recession? 

Car sales may fall during a recession, but would COE prices follow suit?


The Certificate of Entitlement (COE) prices have been hitting new highs ever since the reduction in pandemic measures. With the tightening of COE supply and an economy with rising interest rates (and increasing recessionary fears), what does this mean for COE prices?

We examine the data to find out about the relationship between past recessions and COE prices.

Read Also: Guide To Understanding How The COE Bidding System In Singapore Works

Relationship Between Major Financial Crisis & COE Prices

For this comparison, we will look at data for the COE prices and Singapore’s GDP growth rate from 1999 to 2022. To represent most of the car market in Singapore, CAT A & CAT B data is used.

Note: CAT A represents vehicles ≤ 1600cc & 130bhp, or 110kW. CAT B. CARS > 1,600cc or 130bhp, or 110kW.

There were 3 major financial crises between 1999 – 2022: the Dot Com Bubble, the Global Financial Crisis and the COVID-19 market crash.

*GDP data extracted from “The World Bank” website. *COE data extracted from Travlex

During each of these notable financial crises since 1990, the decline in GDP growth rate corresponded to a decline in COE prices.

Generally, during a recession, the automotive industry will see a fall in overall sales due to its high-ticket price. Just like its counterparts in the consumer discretionary sector, as demand from consumers falls. Thus, with a fall in car sales, COE prices naturally would decline.

However, there are periods in-between crises where the prices of COE do not track Singapore’s GDP growth. This is because of the other factors that affect the COE prices in Singapore.

Read Also: Cost Of Owning A Car In Singapore Over 10 Years

COE Prices Are Affected By Government Policies

In Singapore, the government tightly regulates the number of vehicles on the road. Starting in 1990, the Vehicle Quota System (VQS) system was introduced to reduce vehicle overpopulation in our land-strapped nation. Under this system, bidders will bid on the amount they are willing to pay for their COE which is limited by a quota.

Originally, bidding was done through a closed bidding system where all successful bidders would have to pay the lowest successful bid price in their category. However, this led to fluctuations in the prices due to the lack of transparency. By 2002, the COE open bidding system replaced the closed bidding system.

Reduction In Supply: Available COE Quota 

From 1 August 2022, the supply of COE will be calculated as a rolling average of two quarters, rather than the number of deregistrations in one quarter. This effectively drops the supply rate by 11.5% for the August to October 2022 COE exercise.

LTA has also recently announced that between November 2022 to January 2023 all supplies of COE categories will be reduced, with a total drop of 13.7% in the total supply from the previous quarter.

The reduction in quota supply would likely cause COE prices to raise. As seen in the following charts, the historical fall in the COE quota corresponded with increasing COE prices.

Cat A COE Quota 

*Relationship between COE quota and COE prices. Source: sgcharts

Cat B COE Quota

*Relationship between COE quota and COE prices. Source: sgcharts

Read Also: Cost Guide To Buying A Commercial Vehicle In Singapore

Reduction In Supply: Net Zero Growth Policy

In 2018, LTA announced the cession of the vehicle growth rate factor and introduced the net zero growth rate policy. This is to limit the expansion of the road network (which takes up 12% of Singapore’s land) and accommodate other competing needs for land use. Since then, the LTA has not changed their stance on this policy and has since extended it to 31 January 2025.

This has reduced the amount of COE quota supply available in the market and therefore driving prices up.

Changes In Demand

From time to time, the sway of demand from the public affects the overall price of COE. This usually results in more bids than the number of available quotas (see chart above)

Reasons for the changes in demand include an influx of wealthy foreigners, greater incentives for electronic vehicles (EVs) and many Singaporeans still wanting to own cars.

In times of tight supply and high prices, demand may slowly wane over time as Singaporeans turn to alternatives to car ownership. However, COE prices remain at the moment due to high demand and tight supply.

Read Also: EV Early Adopter Incentive (EEAI); VES; PARF and Road Tax: How Much Can You Really Save If You Buy An Electric Car In Singapore Today?

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