More COEs no guarantee prices will drop if demand not addressed

Increasing supply over past 18 months has not meaningfully brought down premiums

- Lee Nian Tjoe

On Oct 29, the Land Transport Authority (LTA) announced that from February 2025, it will progressively add up to 20,000 certificates of entitlement (COEs) into the system over the next few years.

The authority cited two reasons that allowed it to make the move - reduced vehicle usage from 2019 to 2023, and its ability to better manage traffic congestion with the new satellite Electronic Road Pricing (ERP) system.

The injection of COEs - which give one the right to own a vehicle - comes on top of the quota allowed by the current vehicle growth rate.

LTA has not specified how it will distribute the additional COEs across the five vehicle categories, or over how many years.

This means it will have the flexibility to increase vehicle population by up to 2 per cent of current levels without being bound to a fixed formula or by a set deadline.

The move comes as the overall COE supply has increased, with more COEs projected to be available over the next few years.

At 49,890 pieces, the total supply of COEs from January to October 2024 is 45.7 per cent above what was available for the same period in 2023.

LTA has made several COE supply interventions since 2023, starting with what was labelled a one-time adjustment in May 2023 with COEs that are due to expire in the future.

Since then, this practice of redistributing future COEs - also known as "cut and fill" - has been a regular fixture.