Coe And Property Prices Economics Essay

With the turning population in Singapore, the demand for autos has risen dramatically. COE “ Certificate for Entitlement ” was implemented in Singapore in 1990s to command the sum of autos being bought in Singapore. Even though the monetary value for COE has risen, it has non stopped the demand for autos.

Chin Kee Min, senior director at KIA Motors, said: “ A little addition in demand, because of this little figure of COEs, is really interpreting into a much larger than usual addition in monetary value. Last clip, you had a batch of COEs so you mitigated the monetary value leap. But now you have so small COEs. Just an addition of 10 – 20 per cent in gross revenues will do a large leap in the monetary values.

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Analysis

The indispensable job of traffic congestion is what economic experts would name a “ negative outwardness ” . With a fixed measure of roads infinite, each extra vehicle adds to the demand for the fixed route infinite, and increases congestion for every other vehicle. But the driver of the extra vehicle considers merely his ain benefits and costs, and ignores the cost as ( the outwardness ) on other roads users.

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The class which registered the largest leap in premiums was Category B ( autos 1,601cc and above ) now cost S $ 94,502 each, a 4 per cent or S $ 4,001 addition, compared with S $ 90,501 in the old command exercising.

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hypertext transfer protocol: //www.st701.com/cars/coe/images/2012/Oct2/catB_graph.jpg

Fig 1A

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Fig 1B

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The COE premium for little autos ( 1,600cc and below ) rose by 2.9 per cent from S $ 69,000 to S $ 71,001.A

In the Open class, where COEs can be used for any vehicle type, the premium besides rose by 0.13 per cent to S $ 87,000.

hypertext transfer protocol: //www.todayonline.com/Singapore/EDC121017-0000122/COE-premiums-rise-in-latest-bidding-exercise

There is ever an increasing demand for COE, because in October 2012 the COE quota was 353 but the commands received was 540, in November 2012 the COE quota is 350 but commands received is 573. So ne’er the less there is a deficit of measure supplied. Due to the deficits, purchasers will be given to offer up the monetary value, as the monetary values get higher the measure demanded will fall. When the measure demanded falls monetary values will besides diminish. This will maintain go oning until it hits market equilibrium ; nevertheless the market will ne’er hit equilibrium because of perfect inelastic supply curve.

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Fig 1C

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Calendar month

Round

Quota Premium

Predominating Quota Premium

Quota

Commands Received

November

1

$ 92,400

$ 86,167

350

573

October

2

$ 85,801

$ 87,331

353

540

October

1

$ 80,001

$ 87,331

350

414

September

2

$ 88,500

$ 87,283

351

523

September

1

$ 80,191

$ 87,283

355

466

August

2

$ 88,002

$ 86,410

351

532

August

1

$ 94,502

$ 86,410

350

489

Fig 1D

Since 2011 the auto population has went up by a flooring 10,120 in 2012. It is considered reasonably high as the auto population was up by 7,962 from 2010-2011. It seems that even though COE monetary values have risen it is non halting purchasers from command for it. COE has played a really large portion with purchaser ‘s decision-making ; the gross revenues for Luxury autos have non been affected despite the fact that COE monetary values have non stopped increasing. One of the possible grounds is that, many possible purchasers are holding outlook of future monetary values to lift alternatively of falling, this cause the demand curve to switch right-wards.

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Decision

Even though monetary values of COE are on the rise, the demand for autos has non drop. Government is seeking to command the population of autos and traffic congestion, by increasing the monetary value of COE. To avoid the growing of population in autos and traffic congestion, increasing the monetary value of COE will do the demand for autos bead. When the demand for autos drops there will be lesser autos and traffic congestion. Even though now the monetary value has increased, in the close hereafter the demand will increase for autos when they decrease the monetary value of COE.

Harmonizing to the quotation mark, the writer said that there is an increasing monetary value for class B. One of the grounds might be the non-price determiners which is the consumer ‘s income. If there is an addition in income there will be a rightward displacement of the demand curve. Thus this will increase measure demanded for COE. However looking at the provider point of position, COE has a absolutely inelastic supply curve. Due to the limited figure of COE that can be given out, measure demanded does non the alteration as the monetary value alterations. This will do purchasers to offer higher sum for COE. When the monetary values for COE gets higher, measure demanded will diminish. This will go on until the demand and supply curve intersect to run into the market equilibrium. However due to limited land in Singapore, authorities is seeking to maintain the capacity sensible so that the population of autos will non do traffic congestion.

Like what Mr. Chee Kee Min senior director of KIA Motors said “ The purchaser profile has really changed a batch in footings of affordability ” . So if the monetary value of COEs is non low-cost so drivers will halt purchasing autos

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Mention

hypertext transfer protocol: //www.singstat.gov.sg/pubn/reference/mdscontents.html # TransportandCommunications

hypertext transfer protocol: //infopedia.nl.sg/articles/SIP_1005_2006-04-07.html

hypertext transfer protocol: //www.fas.nus.edu.sg/ecs/scape/doc/COE-st-2aug-pA30.pdf

hypertext transfer protocol: //www.channelnewsasia.com/stories/singaporelocalnews/view/1218855/1/.html

hypertext transfer protocol: //www.todayonline.com/Singapore/EDC121017-0000122/COE-premiums-rise-in-latest-bidding-exercise

hypertext transfer protocol: //www.st701.com/cars/coe/

hypertext transfer protocol: //www.sgcarmart.com/news/COE_past.php? YR=2012 & A ; CAT=b

1. Drumhead

Singapore is a mix economic system. In such based economic system both the authorities and private sectors are entitled to do the economic determinations. Bing a assorted economic system it might non be able to run into its societal ends. One of the jobs Singapore is confronting now would be the addition in population which leads to deficits of lodging. Due to the rapid growing in population and other possible causes such as 2nd timers, upgraders and the down graders, the demand for houses is increasing quickly among the people excessively. The article fundamentally sum up that the demand for residential belongings is increasing in Singapore. Due to this increasing demand the authorities is seeking to stabilise the lodging demands, which is to run into the market equilibrium. The diagram below gives a better apprehension of the increasing population in Singapore.

STATISTIC OF POPULATION FIGURE 1.1a

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2. Analysis for private belongings

Harmonizing to the article Mr Khaw the curate of National Development said that “ from clip to clip, some purchasers are prepared to pay manner above market rating but these are exceeding instances. ”

Due to the deficits, people tend to pay more than the market monetary value of lodging in Singapore. When the measure demanded is greater than measure supplied, Buyers tend to offer up the monetary value. Offering up the monetary value would ensue in the measure demanded to diminish as monetary value addition and measure supply will increase as monetary value addition. This occurs until the monetary value meets the market equilibrium.

“ For private belongings, growing in monetary values slowed from 18 per cent in 2010, to 6 per cent in 2011, and to 0.9 per cent in the first three quarters of 2012. ” ( Paragraph 6 )

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Harmonizing to the above statement, it ‘s apprehensible that the possible grounds for the bead in per centum for private belongings would be due to the alteration of monetary value of replacements which are the New Housing Development Board ( HDB ) flats and resale flats.

Private Property

Figure 2a

When the monetary value for private belongings lessenings, Demand curve will switch leftwards from D1 to D2 to demo a lessening in demand.

Minister for National Development Mah Bow Tan announced in Parliament on 3rd March 2011 that “ Increase the 2011 level supply by offering 14,000 new Build-to-Order ( BTO ) flats in the first half of 2011. This is comparable to the BTO supply for the whole of 2010. If demand sustains, HDB will offer up to 22,000 BTO flats for the full 2011. This will be the largest one-year supply of BTO flats in the last decennary. ” ( 2nd paragraph )

From the statement above, it is apprehensible that the demand for private belongings has decreased due to non-price determiners, replacements such as BTO ( Build to Order Flats ) .

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3.Analysis for resale flats

“ Growth in the Yearly Resale Price Index ( RPI ) besides dropped from 14.1 per cent in 2010, to 10.7 per cent last twelvemonth, and to 3.9 per cent in the first three quarters of this twelvemonth. ” ( Paragraph 7 )

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Under the categorization of non-price determiners, one of the factor which causes Resale Price Index ( RPI ) to drop would be the figure and monetary value of replacements. The replacements would be the goods in competitory demand and act as replacing for another merchandise or goods that compete with one another for consumer purchases. Based on this article during the period from 2010-2011, the replacements of Resale flats would be private belongingss and freshly built Housing Development Board ( HDB ) . However based on the flashed statics, the monetary value is estimated to be increased by 2 % over the 3rd one-fourth of 2012. The addition in monetary value will ensue in addition in demand.

Figure 3a

As shown in the diagram above, the demand for the resale flats decrease from D1 TO D3. The curve displacement leftwards. When there is a 2 % uptick the Demand curve displacement from D3 to D4. The curve has a rightward displacement.

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Figure 2b

The figure 2b shows the resale monetary value index. Explains the alterations the pricing underwent from the first one-fourth of 2010 until 3rd one-fourth of 2012.

Table from-http: //www.hdb.gov.sg/fi10/fi10321p.nsf/w/BuyResaleFlatResaleIndex? OpenDocument

4. Analysis for new flats

To run into demand, Mr Khaw said that “ the Housing and Development Board is maintaining up the current gait of constructing new flats into 2013. ” ( Paragraph 12 )

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Harmonizing to Mr Khaw, he is stepping towards economic system stabilization which is to run into the market equilibrium. Market equilibrium is to forestall deficits and excesss supply of houses. To do this possible, monetary value mechanism which uses the forces of supply and demand is being used to stabilise the market.

Mr Khaw said that “ Every twelvemonth, matrimonies that are affecting citizens, we ‘re speaking about 15,000 household formations a twelvemonth. So 25,000 units ( new flats a twelvemonth ) provide some buffer. But we besides have extra demand from upgraders, down grader, 2nd timers. ”

This statement proves that even if there is a deficit or excess, the demand for lodging is still high. However, Mr Khaw is taking necessary stairss to run into the demand of people.

5. Decision

In decision, Singapore is limited with its natural resources such as with its land infinite. As in of such state of affairs, the authorities of Singapore have been confronting disputing obstructions to supply lodging for all. The increasing population is besides an add-on to the obstructions.

Due to such state of affairss, the demand for lodging have been increasing quickly in all sectors as in such of private, resale and construct to order ( BTO ) flats. Government ‘s one of the chief aims would be to stabilise the economic system ‘s demand for lodging. As the demand rose up, the monetary value does excessively. If there is a alteration in the monetary value there would be a alteration in the measure demanded. As the monetary value gets higher for one option, there would be a alteration in the measure demanded which will so diminish while there will be besides a alteration in the measure demanded for replacements which so addition. This might besides take to offering up of monetary values.

Whenever the replacements are built or if there is grow in the measure demanded, the chance cost for the following available replacements will be forgone.

Due to such obstructions, the possible solution would be the renewal of land so the authorities would be able to stabilise the lodgings demands of Singapore. However, the authorities should take into consideration that repossessing of land has its ain restrictions. It is merely restricted within Singapore and non the vicinity states.