Thrive by The Business Times asked me whether a graduate today could afford the commitments I made in my twenties. The honest answer is no — and the reason is the same piece of arithmetic I teach every week.
In my twenties I owned a car and a private condominium apartment. At the time neither felt extravagant. They were what a working graduate in Singapore was expected to work towards, and the numbers made them reachable.
When Thrive put the question to me — could you do the same today, on a comparable salary? — I did not have to think long. No. And what interests me is not the nostalgia but the mechanism. The gap between then and now is not a story about young people spending badly. It is a story about a fixed quota meeting a rising demand curve, and about what happens to opportunity cost when an asset’s price outruns income.
What actually changed
Median fresh graduate salaries in Singapore have roughly doubled over the past two decades. That sounds like progress until you set it against the things a graduate salary is expected to buy.
| Measure | Mid-2000s | 2026 |
|---|---|---|
| Category A COE premium | ~$12,000 – $15,000 | $128,501 |
| Median fresh graduate gross monthly salary | ~$2,500 | ~$4,600 |
| Months of gross salary for the COE alone | ~5 – 6 months | ~28 months |
| Private housing | Reachable on a dual graduate income | Out of reach for most without family capital |
Read the third row carefully. Twenty-eight months of gross salary buys you the certificate. Not the car. Not the road tax, insurance, parking or petrol. Just the right to register a vehicle for ten years.
Housing has moved in the same direction, if less dramatically. Price-to-income ratios have stretched for both BTO and resale flats, and private property has moved furthest of all. A graduate couple in the mid-2000s could plausibly plan for a condominium. A graduate couple in 2026 planning the same thing is usually planning around a parental transfer.
Three things I would do differently
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1Eliminate status liabilities
I would skip car ownership entirely. In an economy where the certificate alone consumes more than two years of gross starting pay, a car is not a convenience purchase — it is a wealth-depleting liability that removes a 20-something’s capacity to build early capital at precisely the moment compounding matters most.
Singapore’s public transport network is genuinely world-class, and private-hire fills the gaps. The service is available without the balance-sheet damage.
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2Prioritise financial agility over rigid milestones
Rather than rushing into heavy property debt, I would protect monthly liquidity. This is the point most people miss. High debt servicing early in life does not merely cost you interest — it costs you optionality. It is very hard to leave a stable job to start something, or take a lower-paying role with a steeper learning curve, when a mortgage sets your minimum monthly income.
A BTO flat rather than private property is the prudent version of the same milestone, with a fraction of the servicing burden.
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3Compound capital and skills, not just save
I would redirect the money that would have gone into COE premiums, mortgage interest and luxury goods into global equities, low-cost index funds, bonds — and into upskilling.
The goal for this generation is not to save the way one saved in 1998. It is to compound both capital and high-leverage skills early, while the time horizon is long enough for compounding to do the work.
The economics under the headline
A COE is a quota, and quotas behave differently from ordinary supply
The Land Transport Authority fixes the number of certificates available in each bidding exercise. Supply is therefore perfectly price-inelastic — a vertical supply curve. No matter how high bids climb, not one additional certificate appears.
This has a consequence students consistently miss. In an ordinary competitive market, an increase in demand splits itself between higher price and higher quantity. Under a binding quota, quantity cannot move, so the entire adjustment falls on price. That is why COE premiums are so volatile, and why a modest rise in demand can produce a dramatic rise in the premium.
Why a quota rather than a tax
Driving generates negative externalities — congestion, emissions, accident risk — so the market left alone over-allocates resources to car use. This is a textbook case of market failure, and government has two broad instruments for it. A tax targets price and lets quantity settle wherever it will. A quota targets quantity and lets price settle wherever it will.
Singapore chose quantity certainty. Road space is physically fixed and cannot be expanded in response to demand, so the binding constraint is the number of vehicles, not the revenue raised. The cost of that choice is exactly what we are living with: unpredictable, sometimes brutal, premiums.
That trade-off — certainty over quantity purchased at the price of uncertainty over price — is a genuine evaluation point, and one that separates a strong answer from an adequate one.
Opportunity cost, stated properly
Almost every student can write that opportunity cost is the next best alternative forgone. Very few then apply it. The cost of a Category A certificate is not the premium you paid. It is what that sum would have become over the following decades in index funds, in a business, or in skills.
Stated that way, the definition stops being a memorised line and starts being a decision rule. That is the whole point of the concept, and it is why examiners reward application over recall.
The distinction that matters most
Consumption uses resources now. Investment redirects resources towards producing more later. A car, a renovation and a luxury handbag are consumption regardless of how they are financed. Equities, bonds and education are investment. The affordability squeeze facing Singaporeans in their twenties is not primarily a spending problem — it is what happens when the price of certain consumption goods rises faster than income, and the temptation is to finance them with debt anyway.
Questions students ask about this
Why are COE premiums so extreme if price is set by supply and demand?
Because supply is fixed by quota rather than by producers responding to price. The Land Transport Authority sets the number of certificates in advance, making supply perfectly price-inelastic, so any increase in demand translates entirely into a higher premium rather than into more certificates. Ordinary markets absorb demand shocks partly through quantity; a binding quota cannot.
Is a car an asset or a liability in economics?
Formally it is an asset, but a depreciating one that generates ongoing costs and no income. What matters for a household decision is not the accounting label but the opportunity cost: the returns forgone on the capital tied up in it, plus running costs, compared with what that capital could otherwise earn.
What is the difference between using a tax and using a quota to reduce car use?
A tax fixes the price signal and leaves the resulting quantity uncertain. A quota fixes the quantity and leaves the resulting price uncertain. Singapore’s COE system is a quota, chosen because road capacity is physically fixed, which is why premiums swing sharply while the vehicle population stays controlled. Naming that trade-off explicitly is what earns evaluation marks.
Is the COE relevant to the H2 and IB Economics syllabuses?
Yes. The SEAB H2 Economics syllabus requires application of demand and supply, elasticity, market failure and government intervention to real contexts, and the IBO Economics syllabus covers market failure and policy responses in the same terms. The COE illustrates a quota with perfectly price-inelastic supply and, alongside ERP, a policy response to a negative externality. Examiners reward Singapore-specific application, and this is one of the strongest examples available.
This is the kind of application that separates a top-band answer from a competent one — not more definitions, but knowing which real Singapore case fits which piece of theory. It is what we teach in our JC Economics Tuition (A-Level) programme, dedicated H2 Economics Tuition as well as IB Economics Tuition classes.
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