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A letter sent in by a reader of ST.

The Straits Times
www.straitstimes.com
Published on Dec 27, 2012
Cooling measures needed for cars

A KEY factor influencing the escalation of the certificate of entitlement (COE) prices and the continuing uptake of new cars in recent months is the easy availability of cheap credit ("Car buyers want COE system reviewed"; Tuesday).

Many buyers are able to drive away in a new or newer second-hand car with little down payment or after trading in their existing car.

As the interest rate is so low and the monthly payments relatively so as well, many are giving in to their desire for cars.

Increasingly, advertisements for cars are highlighting the low monthly repayments and/or the low minimum down payment.

Many have advertised "subsidised interest rates or repayment free periods".

However, even at the "promotion" price, many buyers end up taking a sizable loan, even when they do not need one.

Some buyers, especially the younger ones, may be living beyond their means.

The COE prices are being distorted by the complementary forces of cheap, easy credit adding to the demand side, and government efforts to squeeze the supply.

It is time that the Monetary Authority of Singapore implements some cooling measures, such as a minimum 30 per cent or higher down payment for the purchase of cars, and a minimum 60 per cent down payment for those buying a second car.

This will help to ease the demand distortion and lower the risk of people living beyond their means.

Car dealers also should not be allowed to quote car prices that are subject to a loan quantum.

Additionally, the Government may want to rethink the pace of its supply correction.

Chew Eng Soo

(26-12-2012, 11:39 PM)bookworm Wrote: [ -> ]Simple, buyback COEs expiring in 2014~16 and re-issue as new quota for 10 years to even out supply. Total vehicle population remains unchanged.

your solution is highly unfair to owners of expiring COE. You rob their chances of owning a car cheaper now and going to own a car cheaper in 2014 - 2016(more COEs coming, they have the best luck). Now, they have to bid high high with the rest.

If it is not fair, it won't get started.
[/quote]

My suggestion is to buy at prevailing COE rates (less a discount for admin purposes). It is not based on the old COE price tied to the car. Price should be fair enough to entice people to cash out, yet not open a flood gate. The decision is by owner, not from govt, so no robbing involved.

The objective is to even out the yearly quota. Rules to build around this.

(27-12-2012, 09:51 AM)bookworm Wrote: [ -> ]My suggestion is to buy at prevailing COE rates (less a discount for admin purposes). It is not based on the old COE price tied to the car. Price should be fair enough to entice people to cash out, yet not open a flood gate. The decision is by owner, not from govt, so no robbing involved.

Why would anyone sell their COE at a discount to market rate only to buy back at market rate?

(27-12-2012, 09:51 AM)bookworm Wrote: [ -> ]My suggestion is to buy at prevailing COE rates (less a discount for admin purposes). It is not based on the old COE price tied to the car. Price should be fair enough to entice people to cash out, yet not open a flood gate. The decision is by owner, not from govt, so no robbing involved.

The objective is to even out the yearly quota. Rules to build around this.

Why would anyone in their right mind like to sell their expiring COEs(but by the time their COEs expire, they can buy it cheap again) just to buy a more expensive one?

It will hardly happen.

(27-12-2012, 07:37 AM)freedom Wrote: [ -> ]

(27-12-2012, 01:23 AM)violinist Wrote: [ -> ]How is it that housing can be controlled (while you can buy as many private houses as you can, you cannot own more than 1 HDB flat, whether it is subsidized or from open market, because, as we understood, HDB provides housing for the masses in land scarce Singapore. And your income determines or restricts the type of HDB flat that you can buy) while cars cannot? (or is it don't want to control?)

since when, car becomes as important/necessary as house?

in that case, i would like everything(good/expensive) to be offered the same way....

It is not just an issue of necessity, it is also an issue of resource distribution, the limited resource in both cases of housing and cars being the land. Right now, some people are beginning to question whether the method used to distribute these resources to the people are fair. Of course, "fair" is a subjective word. And people, especially Singaporeans, historically, have a high tolerance for unfairness and inequality. Let's see how it unfolds.

(27-12-2012, 10:46 AM)freedom Wrote: [ -> ]

(27-12-2012, 09:51 AM)bookworm Wrote: [ -> ]My suggestion is to buy at prevailing COE rates (less a discount for admin purposes). It is not based on the old COE price tied to the car. Price should be fair enough to entice people to cash out, yet not open a flood gate. The decision is by owner, not from govt, so no robbing involved.

The objective is to even out the yearly quota. Rules to build around this.

Why would anyone in their right mind like to sell their expiring COEs(but by the time their COEs expire, they can buy it cheap again) just to buy a more expensive one?

It will hardly happen.

Agree... the 2nd hand car market is already trading at discount to replacement cost ie COE current market cost is being factored.

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(27-12-2012, 10:55 AM)violinist Wrote: [ -> ]

(27-12-2012, 07:37 AM)freedom Wrote: [ -> ]

(27-12-2012, 01:23 AM)violinist Wrote: [ -> ]How is it that housing can be controlled (while you can buy as many private houses as you can, you cannot own more than 1 HDB flat, whether it is subsidized or from open market, because, as we understood, HDB provides housing for the masses in land scarce Singapore. And your income determines or restricts the type of HDB flat that you can buy) while cars cannot? (or is it don't want to control?)

since when, car becomes as important/necessary as house?

in that case, i would like everything(good/expensive) to be offered the same way....

It is not just an issue of necessity, it is also an issue of resource distribution, the limited resource in both cases of housing and cars being the land. Right now, some people are beginning to question whether the method used to distribute these resources to the people are fair. Of course, "fair" is a subjective word. And people, especially Singaporeans, historically, have a high tolerance for unfairness and inequality. Let's see how it unfolds.

I would say Singapore socialist ideology is GENERALLY quite successful compared to other countries, from capitalistic USA to communist China, oil rich Middle East to human resource rich India. We don't have to look far but just at our immediate neighbor.

Intention is not to buy from all owners, just a percentage of owners to even out the quota. It's a matter of the discount rate to be applied. Throw in some tax incentives rebates if need be. Objective is to even out the CEO quota. Rules build around it. This is fundamental and has to be solved.

(27-12-2012, 11:57 AM)bookworm Wrote: [ -> ]Intention is not to buy from all owners, just a percentage of owners to even out the quota. It's a matter of the discount rate to be applied. Throw in some tax incentives rebates if need be. Objective is to even out the CEO quota. Rules build around it. This is fundamental and has to be solved.

The government does not need to "buy back" COEs. All it needs to do to even out the supply is to withhold supply in the years where there are a lot of COEs. Then, in the years when there are too few COEs, it can release these withheld COEs. After one 10-year cycle the age profile of the car population will be evenly distributed and COE prices should no longer vary so much from year to year.

(27-12-2012, 02:53 PM)d.o.g. Wrote: [ -> ]The government does not need to "buy back" COEs. All it needs to do to even out the supply is to withhold supply in the years where there are a lot of COEs. Then, in the years when there are too few COEs, it can release these withheld COEs. After one 10-year cycle the age profile of the car population will be evenly distributed and COE prices should no longer vary so much from year to year.

Agree. This approach will work if the COE prices do not shoot up much next 1 year. Need to address the near term supply. If LTA can increase the supply next 2 years, problem solved by itself.

I think we should encourage car sharing for better allocation of resources. Everyday while I am on e expressway to work, I see plenty of cars with driver only but no passengers. Imagine all the people standing in MRT would be willing to fork out if they can catch a ride to their workplace.