Sun. Feb 25th, 2024

    I grew up always wanting to drive my own car. But I’m from the world’s most expensive city to live in, and now I know I never will.

    Vehicles at used car dealership in Singapore. A car with 8 years or more left in its lifespan typically costs more than $80,000.

    In Singapore, a family car can easily cost you more than $100,000, even if it’s a used vehicle.Prices are sky-high in the city-state because it restricts how many vehicles ply its roads.With public transport on the rise, fewer people here now care about owning a car.

    As a teenager, one of my hallmarks for success as an adult was hitting the road in my own car.

    My dream ride didn’t have to be a supercar or a luxury model; I just wished for something sturdy, safe, and of European make, maybe a low-end Volvo or Volkswagen.

    But I’m in Singapore, frequently crowned the most expensive city in the world to live in, and owning a car is turning out to be less affordable for me than owning property.

    A Hyundai Avante, which starts at $21,475 in the US, would set me back $135,000 in Singapore.

    A Volkswagen Arteon with a starting retail price of $43,000 in the US costs $200,000 here. One could buy a 42-foot yacht with that cash.

    The ridiculous price of cars in Singapore stems from one factor — the certificate of entitlement, or COE.

    Old men in coffee shops curse it. Millennials dread it. And it’s convinced me, a guy in my mid-20s, to abandon my lifelong goal.

    Skyscrapers and traffic in Singapore.

    Why a simple certificate could cost so much

    The COE is a 10-year permit for a vehicle to be driven in Singapore. First implemented in 1990, it lets the city-state avoid traffic nightmares by controlling how many vehicles are allowed on the roads.

    For car buyers, the COE is an extra cost that can easily eclipse the actual price of a car.

    Here’s how it works: Say I want to purchase a $25,000 brand-new sedan.

    I might have $25,000 in my bank, but first, I’ll need to bid for a COE, which permits the sedan to drive on roads here.

    Every year, the government issues a limited number of vehicle certificates. These are put up for competitive bidding, and because demand for cars is always high in Singapore, I’ll have to outbid hundreds of other car buyers and their dealers.

    It’s the classic demand-and-supply theory you’d learn in high school. When more certificates are available, bid prices go down. And if fewer certificates are available, bid prices go up.

    Demand for cars is almost always high in Singapore. These BMW family cars cost around $103,000 in 2017. That red sedan cost $150,000.

    They’ve gone as low as about $9,000 in 2006, meaning I might have bought my $25,000 sedan for about $36,000. Not too bad.

    But they can also quickly surge to $70,000, such as in 2013. In total, my sedan would have cost me almost quadruple the retail price.

    Why cars are so expensive

    These drastic shifts occur because Singapore has sometimes seen huge cuts and bumps in the supply of certificates issued yearly.

    In 2006, more than 59,000 certificates were issued for cars with engine capacities under 1600cc. In 2013, only 8,500 were available.

    Last year, COE bids hit staggering record highs, soaring to $113,000 for more powerful cars. My desired $25,000 sedan could have cost me upward of a whopping $105,000.

    There’s another catch. Even if I could afford that $105,000, I wouldn’t get to keep the car forever.

    A COE expires when it hits the 10-year mark, after which you’ll have to buy a new one for your car again. That, or forfeit the ability to drive it completely.

    Used cars have inflated prices as well. If you decide to sell your ride before its certificate expires, the COE goes along with it.

    This secondhand Toyota Corolla Touring Hybrid with nine years left on the clock, for example, costs $130,000.

    Cars for sale are parked at used car dealerships in Singapore October 17, 2022. COE prices went up to $67,000 that year for lower-end cars, despite more than 13,000 certificates being made available.

    The bottom line is that the COE is inescapable if you want to buy a car in Singapore.

    Walter Theseira, associate professor of Economics at the Singapore University of Social Sciences, told me that he predicts bid prices will become far cheaper in about five years due to market forces.

    Some signs of a decline are showing. On Thursday, COE prices for lower-end cars fell to about $48,000, a steep drop that shocked the market. Experts say bids should bounce back shortly as people rush to buy cars.

    Yet even in the best years for buyers, bid levels have rivaled the entire cost of a car. In 2019, when prices dropped to their lowest in the last decade, most bids still hovered at $25,000 per car.

    That’s a significant investment in a metropolis where the median income is $3,900. An October analysis on car ownership by local news outlet TODAY found that car owners. This means those wealthy enough to afford a COE typically spend around 30% of their monthly income on car expenses.

    Compare that to Americans spending an average of 16% of their household expenses, which doesn’t include their savings, on cars.

    Meanwhile, other big responsibilities beckon, like buying a home before I’m 40. It’s possible for most Singaporeans, even in such a dense nation. Nearly 90% of Singaporeans live in homes that they own, per government statistics.

    So what’s the alternative?

    Singapore’s government is keenly aware that if it wants to curb car ownership, it has to offer an alternative for commuters, said Theseira, whose research focuses on transport economics.

    In a sprawling city like Singapore, public transport is the obvious choice. Getting people to take the bus or train has its allure for every city government — it’s good for the environment, cost-efficient, and creates far less traffic.

    The downsides are plenty, of course. Getting out and about brings discomfort. Singapore is unceasingly humid, with regular 86-degree heat and brutal thunderstorms that seemingly invade the skies out of nowhere. The subway takes me double or triple the time to reach my destination compared to if I drive, even though Singapore’s only half the size of New York City.

    Yet, there’s a lot to look forward to for someone who doesn’t intend to own a car here.

    In the last 20 years, Singapore has poured funds into its subways and buses, pivoting away from its reliance on passenger fares to pay for public transport.

    “We’ve been in the business of encouraging people to take public transport for years because we know driving or taking a motorbike just isn’t sustainable,” Theseira said. “But the effort to do this really kicked into high gear in the last one or two decades.”

    Taking public transport has been a norm for decades in Singapore, but might soon become the only real option for those who aren’t wealthy.

    Singapore has invested at least $113 billion into its subway system since the late 1980s. On some recent projects, we’ve spent up to $1.3 billion for every mile of railway built, per transit project tracker Transit Costs.

    That’s more expensive than any subway project in Tokyo, like the Sotetsu Shin-Yokohama JR Line, which was built for $640 million per mile, per Transit Costs. But it’s still cheaper than some of New York City’s projects like the East Side Access, reported by The New York Times to cost $3.5 billion per mile.

    Admittedly, pockets of Singapore are still hard to access via mass transit. My neighborhood is about a 20-minute bus ride from the nearest subway station, and the bus stop is a seven-minute walk from my home.

    But when I was in grade school in the early 2000s, Singapore had just two subway lines. Each one fielded about 30 stations.

    Now, the country operates six full subway lines with more than 140 stops. Two additional lines are being built, including one that puts a station across my block.

    Many of Singapore’s rail lines run over urban land, a common sight for subways in Asia.

    For those with kids, Singapore buses also come with foldable ramps for stroller and wheelchair access, and subway stations feature escalators and elevators.

    For the lazy, the advent of ride-hailing companies like Uber offers a fully air-conditioned trip at our whims. Temasek Holdings, our government’s massive investment company, holds a stake in Grab, the main ride-hailing operator here.

    A car market unique to Singapore

    The car market in Singapore is pretty much a scenario not seen elsewhere in the world, Theseira said.

    He said that other governments have tried solving traffic problems by expanding roads, introducing taxes, restricting parking, or banning cars from driving in some areas.

    Some of these, especially building expressways, typically tend to backfire in the long run, said Theseira. “It’s expensive to build new roads, yet it’s popular because it looks like nobody loses,” Theseira said.

    “But over time, more people start to buy cars, more people start driving, and they fill up all the road space you created,” he said.

    Meanwhile, while unpopular, Singapore’s COE prices are working for now.

    Traffic jams happen, but they typically don’t hold a candle to the notorious hourslong ordeals in Jakarta, Bangkok, or Kuala Lumpur. Singapore’s air quality is also rated far better than the air in those three capitals.

    Jakarta is known in the region for its notorious rush hour jams.

    With results showing, it’s highly unlikely Singapore’s governing political party — continuously re-elected since 1959 — will remove the COE system anytime soon.

    Instead, they’re hoping Singaporeans like me will see getting behind the wheel as a luxury, and taking buses, trains, or cabs as not just a standard you can live with but a lifelong norm.

    Even local car dealerships are saying owning a ride isn’t important.

    “Whoever can afford the luxury to pay for convenience and time saved, they will continue buying cars,” Benjamin Loo, chief operating officer of CarTimes Group, told TODAY for its October analysis.

    Data indicates this car-lite mindset is taking hold. The Straits Times, Singapore’s national daily, in 2016 surveyed 500 Singaporean adults under 35 about their attitudes on car ownership.

    About 65.5% of them aspired to buy a car one day. In a 2022 survey, that proportion dropped to 50.5%.

    In just six years, 15% of our young adults gave up on a lifelong dream. So have I.

    Read the original article on Business Insider

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