In the second COE bidding exercise of 2016, premiums for Cat A spiked, while Cat B and E premiums fell significantly.

Premiums for Cat A, for cars up to 1,600cc in engine capacity and with an output of no more than 130bhp, went up by $6,299 (14 percent) to end the bidding tender at $51,301.

Premiums for Cat B, larger cars with more than 130bhp or engine displacement larger than 1,600cc, decreased by $4,831 (9.6 percent) and ended at $50,089.

In Cat E, the open category, prices went down $4,089 (eight percent), with premiums closing at $51,000.

The spike in Cat A premiums is likely because the significant drop in the last bidding exercise saw many prospective buyers flocking to the showrooms. Coupled with the recently concluded Singapore Motor Show, it is evident that there was a surge in demand for Cat A cars, with more than twice as many bids received than the quota for Cat A COEs.

News that the COE supply for February to April will increase significantly is also a likely contributing factor to the surge in demand and hence the spike in Cat A premiums. While car prices are expected to fall, it will likely happen in later months, when demand has stabilised, and we can expect COE premiums to continue to fluctuate in the next couple of bidding exercises.