The reason why COE prices will rise is because of high demand. Supply cannot increase much due to our limited land space.

The high demand is due to:

1. Rising disposable income of dual income families. Many households have income of $10k pm or more. These families can easily afford a new car easily provided they have enough savings for the 50% downpayment. Given that most families bought their HDB BTO flat very cheaply, they can finance their housing loan just by using their CPF funds without having to use cash from their take home pay.

2. Many cars are old. So this means many existing car owners will need to replace their old cars and buy a brand new one. So over the next two years there will be high demand for new cars.

3. Increase in population. As the population increase, there will be more drivers and so demand for cars rise.

4. Strong property market over the past few years. There are many families who made a lot of money after they sold their BTO HDB flats. For instance, they may buy a BTO flat for $200k and after 5 years MOP, they sold at $500k. So they make profits of $300k which they can use to buy a new $100k car, paid in full without any loan. There are also many successful property investors who made a million dollars in profits over the last few years (now no longer possible though). So these people can easily buy new cars for their family members, one for husband, one for wife, one for son to drive to Uni, one for daughter to drive to work. Will only cost $400k in total if they buy four $100k cars.

5. Fresh graduates earn a lot more today than 10 years ago. A fresh grad working in the finance industry can easily earn $100k pa if he has good degrees. He can easily buy a new car with his salary.