‘Commuters may see years of price increases’

By Seah Chiang Nee

The Singapore commuter, whether using the car or train, is not looking ahead with a great deal of enthusiasm.

Living among 5m people, he will likely face not only continuing over-crowdedness but also a slew of price increases in the months — possibly years — ahead.

Public transport — next to housing and healthcare — has become a casualty to rapid population expansion.

When we had three million (in 1990) it was a breeze; at four million (2000), jams were starting to show on roads, in public housing and hospitals and other facilities.

But with five million currently, some things are bursting at the seams.

Prices raised to reduce demand

"I think it will take another five to 10 years to balance supply and demand in facilities like transport and housing to cope with the expansion," said an economist friend.

Until then, he expected continuing overcrowding in trains and buses at peak hours, with the government trying to control it by raising fees.

These days, unlike a year ago, I am frequently getting a "Sorry but all our taxis are busy" response whenever I phone for a cab, even on weekdays.

And in the Singapore General Hospital, car parks are full on most days.

"Our government seems to be trying to resolve problems of insufficiency mainly by raising prices to reduce demand," he added.

These rising costs of transportation (excluding petrol pump prices) are adding to an already high cost of living.

In June, the consumer price index rose to 5.2%, up from 4.5% a year ago, with transport (rising 10.4%) being a top gainer.

The prospect for relief in the coming months — irrespective of whether a commuter drives or uses public transportation — is slim.

Consider the following:

* Public transport: Operators of trains and buses have applied for price increases, and the government looks likely to grant their requests, despite strong public reaction.

* Roads: Electronic Road Pricing (ERP) rates at two busy highways serving tens of thousands of cars were raised on Aug 1 in the latest quarterly review.

* Parking: In the central business district it costs an average of S$30.40 a day, with a survey saying central Singapore has the most expensive car parks in South-East Asia.

* Cars: The cost of a COE (Certificate of Entitlement) hovers at a 14-year high. This piece of paper is required if one wants to buy a new car: S$49,000 for a 1,600cc car and S$70,000 for one of higher capacity. In comparison, the cost of a car varies from S$80,000 to S$100,000.

The flourishing COE market is one of the unusual features of Singapore.

Costly certificate of entitlement

"It now costs more to buy a COE for a medium-sized car than to buy 1kg of gold," a blogger observed.

Some of my Malaysian friends have found it hard to understand the rationale.

One of them laughed when he first heard that Singaporeans had to pay S$49,000 for a piece of paper before he can purchase a car that cost the Japanese only S$15,000 to build.

"It's a terrific idea. The Japanese do all the work, while the government here makes a profit three times bigger."

The government justified the COE — just like the electronic road pricing — as necessary to reduce the number of cars on the road.

It wants to avoid the sort of traffic gridlock many advanced cities face.

The Singaporean motorist is not laughing. He has seen COE prices rising higher and higher in tandem with the number of wealthy foreigners settling here.

For some, it is a good reason for speculation — for selling short if you believe this record high is a balloon waiting to burst, some cynics said.

"If there were derivative instruments based on COE prices, I'd be shorting them," said a blogger.

"Talk about 'prices can only go up' are fairly good indicators of bubble tops."

Consequently, the high COE cost has put paid to the dream of many young Singaporeans who earn between S$2,500 and $4,000 a month to own a car.

The COE lasts 10 years, after which a new one is needed.

An owner who scraps his car after five years, for example, will get a rebate of about half of what he paid. So if he had paid high, his rebate will be high; if he had got it cheap, it will be low.

But the cost to the public is high.

A reason for migration

Young car-crazy Singaporeans complain of deprivation as a result of the high cost of buying and owning a vehicle in Singapore, one of the costliest places in the world.

Expensive houses and cars are often cited as reasons for more professionals migrating to Australia or New Zealand.

An online critic said: "The COE system is promoting waste by encouraging owners to discard perfectly functional cars and replacing them with new models.

"In other developed countries, it is not unusual to see a 1965 Beetle (or cars older than 15 years) still in good and roadworthy condition."

It has also become a source of inflation. The owner is generally encouraged to buy a new car rather than repair it.

"Under the present immigration policy, expect COE to hit S$250,000 one day, and cars maybe half a million dollars," warned a letter writer.

A former Reuters correspondent and newspaper editor, the writer is now a freelance columnist writing on general trends in Singapore. This post first appeared on his blog www.littlespeck.com on 7 August 2011.