Loan-To-Value Ratio of COE Financing for Private Vehicles

Mr Ong Teng Koon asked the Prime Minister (a) whether the Ministry will consider reducing the loan-to-value (LTV) ratio of COE financing for private ownership of vehicles; and (b) what is the Ministry's assessment of the impact of every 10% drop in the LTV ratio on the prices of COEs.

The current high COE prices reflect a confluence of fundamental factors. Healthy income growth, coupled with low interest rates, has underpinned demand for cars. On the supply side, reduction in the target vehicle growth rate and the number of vehicle de-registrations have led to fewer COEs being available.

These fundamental factors are likely to persist for some time. The Government is monitoring the situation, as private road transport costs add to business costs and inflation. However, it is important to look at any possible measures holistically, and consider if they can be effective in promoting greater stability in the COE market. The Government is also making major investments to improve public transport which is the more sustainable mode of transport for Singaporeans in the long run.

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Mr Ong also asked about the impact of every 10% drop in the LTV ratio on the prices of COEs. While lower LTV ratios will have the effect of constraining credit for vehicle purchases, it is difficult to isolate the impact on COE prices of any given change in the LTV ratio, given the many other factors affecting COE prices. Indeed, the introduction of loan limits between 1995 and 2003 had little discernable impact on COE prices.