Even by Singapore standards, record car prices in recent months have been so high that people are asking how fairly scarce resources in the small city-state are distributed.
With certificates of entitlement (COEs), which you need to bid for to own a car, shooting past S$100,000 for small-capacity cars, owning a private car is fast becoming a forlorn dream for many middle-class families.
A Toyota Corolla costs more than S$160,000 while some of the cheapest alternatives around, like the Seat Arona and Suzuki Swift, are going for more than S$120,000.
Yet, million-dollar Ferraris are often seen zipping around the more glamorous parts of town. Surely, there are still more Corollas on the roads here than Ferraris, but such observations are at once jarring and difficult to accept for many citizens.
Is it the hot money from the growing number of family offices that have set up shop of late? Or have Singaporeans become so rich to afford such costly cars?
However you see it, the root of the problem is the stiff competition for resources. In land-scarce Singapore, private car growth has been limited while the population has increased so you can expect a regressive tax like the COE to keep getting higher.
Look beyond cars and the same applies to many other things that are in scarce supply. Housing prices are shooting past expectations, despite reassurances from the government that public flats are still affordable.
These issues have raised questions on how equitably resources are distributed in Singapore. Is the old playbook of taxing the hell out of every scarcity – starting with the COE in 1990 – still the best way forward?
While the economy may ebb and flow, just like the number of COEs or new cars allowed over time based on the scrapping of old vehicles, there is a new layer of middlemen enabled by data and technology that is here to stay.
One question repeatedly raised by consumers is why buyers of private hire vehicles (PHV), including those supporting services like Grab, bid for the same limited number of COEs that private individuals are up for.
Last year, the government said there was no evidence this practice had pushed up COE prices. Yet, you question how many COEs are bid for and won by these PHV bidders each month.
How has this not affected the outcome of the bids, especially in months when there are fewer COEs to go around?
Just as taxis have been removed from the bidding of COEs in 2012, surely a for-profit entity cannot be competing for the same scarce resource as individuals who use a car to ferry their old folks or young kids, for example.
If the current practice is allowed to continue, would COEs hit S$200,000 one day? If so, a private car would probably be owned only by two lucky groups of people in future.
One, the super-rich with their Ferraris and Bentleys. Two, though indirectly, platform companies such as Grab and others that make a tidy sum out of this same scarcity.
If you can’t afford a car, then you need to get a ride from Grab to get somewhere urgently. Of course, there’s the bus and MRT but what if you wish to ferry your old folks to the clinic? Pay whatever the surge pricing is.
To be fair, let’s not single out Grab. There are many other companies happy to seek rent from a lack of supply. Car rental companies that let you use a vehicle for a few hours are another example.
There are similarities with housing as well. An HDB flat too expensive to buy or even rent? Try co-living – you’ll get a tiny room and share a common area with other flat mates. There’s great coffee.
Essentially, where there is scarcity, there is opportunity for platform companies. It’s the old rentier model, except that these companies are rich with data and know how to atomise each little portion of a scarce resource.
Cutting up an apartment into small rooms, slicing up a few hours on a rental car or getting a nearby ride to you, they are built to extract maximum income from subdividing anything in short supply into even smaller portions.
Flush with money from venture capitalists, these platform companies are able to play the long game. In the car example, they can sell off their fleet when the price is right or choose to maximise rental (through bookings) when people can’t afford cars. Win-win.
Notably, after years of losses, Grab now expects to be profitable this year. Uber, in the United States, is also reporting record revenues and is set to turn in a profit this year.
Besides slicing things up and renting them, many large platform companies, so-called because they provide a platform that link buyers and sellers, also hire many “taskers” or people to do a job without any job security.
The workers who fix the toilet for you? The cleaners who come in for a few hours to tidy things up? The handyman who got your lights working again?
They either pay a cut to the middleman or are hired at a rate that’s well below what a consumer pays. Yes, the platform fee or middleman tax.
This is the flip side to the platform economy that is just as important. With rising prices of all things like cars and housing, what about salaries for jobs that are traditionally lowly paid in Singapore?
To be sure, consumers have to pay more to value these jobs. At the same time, is enough being done to make sure these new middleman rentiers do not abuse their market position and depress the wages of those who perform tasks on their behalf?
There’s also the danger of a rush to the bottom. Notice how most platform companies do not have customer hotlines to cater to missed or cancelled orders – you have to submit a form online and wait for a call back.
And consider how unequal a relationship a dominant player like Grab can have with customers. It can charge a fee for waiting time if a car has to wait for a passenger, but there is no compensation or even an apology if a driver cancels a pickup.
As the new middlemen for many workers and consumers, these platform companies need to be regulated effectively so they play their role constructively without abusing their position.
Of course, you can argue that things were worse before the arrival of Grab, when taxis used to be unavailable during peak hours and you couldn’t find a handyman easily.
Yet, while such on-demand offerings have helped meet the demand in the past, they have since morphed into companies that span sectors and appear at times too big to regulate.
As these platform companies keep expanding, into banking, for example, it’s time to rethink how they have reshaped the way resources are allocated.
When the shortage is so acute, citizens should not be made to compete with these companies that seek to gain even more from such scarcity.
In a system where affordability is based on how much pain you can take from a tax, their market power will only yield outcomes that are unequitable to a growing portion of the population.
Unfortunately, for citizens in Singapore, there is no hinterland to retreat to. No rural area out of the city where things are less costly.
Here, those who are priced out of the game either have to contend with whatever cost the rent is for a Corolla or watch the Ferraris zoom by in envy.