If you’ve been following the news, you should have heard about MAS easing the loan curbs.¬†So where is COE headed? Most people say it will go up, but I think it will only inch up marginally.

Reducing downpayment by 10% will help buyers reduce their upfront commitment by around $8K (for a $80K car). If COE shot up in excess of $10K, e.g. an $80K now costs $90K, it would defeat the loan curbs ($32K vs. $27K downpayment).

The extension of loan tenure from 5 to 7 years makes monthly commitments easier on the pocket, but right now most buyers waiting on the sidelines are likely more cash strapped. Remember: it is supply and demand that causes COE prices to move.

Also, the number of COE quota available right now actually meets or exceeds that of 2008 when COE was <$20K. With so many cars going to the scrapyards, we will see this quota sustain for quite a while. I believe this is the primary reason why the loan curbs were eased — otherwise we may see $20-30K COE by 2018. I believe the loans will be further relaxed in 2017 (to 80% + 8 years) if total quota exceeds 2,500 in each bidding. If the quota remains fairly constant, then there will be no change.

In summary, I think COE prices will not move much… it may rise a little bit, with a little spike in the short term due to sudden demand, but should eventually stagnate around $50K for both Cat A and B.

P.S. I can’t help but feel that LTA really screwed up on Cat A vs. B differentiation even when they had the one opportunity to do it right.