The full implications of the government's recent announcement about the reduction of the vehicle growth rate to zero have not hit us yet.
Before the announcement was made, many Singaporeans no doubt continued to hold on to the vague hope that perhaps someday they'd be able to afford a car.
But as the reality hits us that cars could one day be completely out of reach of all but the richest, and the public transport system continues to disappoint, Singaporeans may soon realise that paying more to live in a conveniently-located area may be the only option left.
That's why in the medium- to long-term, the zero vehicle growth rate could influence property prices. Here's how:
Housing prices in accessible areas will rise
Right now, many young couples are happy to ballot for HDB flats in less-than-ideal neighbourhoods because they cost significantly less than flats in mature or more central estates.
All this might change as cars become more affordable, especially for families wishing to avoid a long public transport commute with children in tow.
If cars are completely out of reach of middle class Singaporeans, paying a six figure premium to secure a home in a central area will seem like a more prudent idea.
As a result, Singaporeans might see the prices of homes in central areas rise disproportionately.
Housing prices in inaccessible areas will see poorer capital appreciation
As a corollary of the above, housing prices in inaccessible areas far away from the city centre or that are not within walking distance of an MRT station are likely to be depressed. Properties in these areas are likely to see poorer capital appreciation.
So if you are buying a home or an investment property, location is going to be even more important than before, moving forward.
More people might consider renting
The HDB and CPF systems undoubtedly act as incentives for Singaporeans to purchase property rather than rent, as CPF funds cannot be used to pay for rental accommodation, and renters are also excluded from HDB subsidies.
However, the main problem with buying a home is that you are essentially locked into one area. If you buy a home and then get a job on the other side of the island, moving isn't usually an option and you're basically stuck spending 3-4 hours on public transport every day.
This problem is made more severe by the HDB Minimum Occupation Period, which forbids HDB flat owners from selling their homes before the expiry of the MOP, usually five years. Seller's Stamp Duty also also penalises buyers who sell their homes within 3 years of less of the purchase.
Given all these restrictions, the zero vehicle growth rate might have the effect of pushing more Singaporeans into the rental market.
Right now, young, well-paid Singaporeans who live with their parents often opt to buy a car to reduce the amount of time they have to spend on public transport.
When COE prices reach a certain point, these people might find it more worthwhile to use that money to move out and rent a home closer to their workplace instead.
When this happens, Singapore's rental market, which has been in a bit of a slump lately, might start looking up. It is likely that those who own property in central areas will stand to benefit most, which could exacerbate wealth inequality.