It had to happen. Chateau Lafite, the Bordeaux worshipped by mainland Chinese wine collectors, has finally fallen from grace. Top wines plummeted in value by 12 per cent over the 12 months to September 2012, according to the Liv-ex 100 index. Chateau Lafite had such a stranglehold on the market it was actually the largest component of the index.
Now that its bubble has been burst by increasingly confident Chinese wine buyers who are no longer afraid to stray beyond Bordeaux, the other varietals are rising up the charts. If you need evidence of this, check the prices Henry Tang’s collection of burgundies achieve when auctioned in a week or two. A few years ago burgundy would not have attracted nearly so much interest, but with education comes confidence and collectors of all categories behave less like sheep and follow their own hearts.
Property no longer king
That old paradigm about property performing best over time and bricks and mortar being the safest investment still holds good. Or at least one would think so, looking at Hong Kong’s soaring property prices and people’s willingness to sink millions into even daft projects like hotel rooms, with no guarantees whatsoever. But High Net worth Individuals behave differently to the rest of us mortgage slaves. Of course they have property everywhere, but according to China’s Hurun report, quoted before in this column, 64 per cent of mainland millionaires also invest heavily in collectibles. And I don’t just mean handbags and watches.
And the rich in emerging markets seem to choose to spend their cash on items they can enjoy, as well as banking on things will go up in value. The crash of 2008 seemed to mark a turning point and after that the over-concentration on financial markets ended and the super-rich started spreading their investment net to real estate and beyond.
The Knight Frank “Passion Index,” published next week but quoted in the FT, compares the performance of selected luxury items over a decade. Fine art, wine, jewellery, watches and classic cars are all assessed. Fine art is the new vogue “investment of passion”. The major auction houses in London, New York and now Hong Kong show the sky high prices achieved by art these days, but it’s only the best of the best that grabs attention, with price inflation heavily loaded at the Picasso end and not much below.
Although spending on fine art showed the greatest jump last year, the sector overall recorded a 199 per cent increase over 10 years. The highest return on investment in fact goes to classic cars, at 395 per cent growth, according to the HAGI Classic car index. Except for gold at 434 per cent, cars have outperformed everything else.
Coins are not bad at 248 per cent, stamps at 216 per cent. Perhaps surprisingly, fine wine only racked up a gain of 166 per cent in 10 years, showing that the best returns don’t always accrue from the most popular investment categories. Watches, for example, the second most popular investment, appreciated only 76 per cent over a decade in the passion categories. According to Hurun, the average super rich mainlander has at least six pricey timepieces.
But still, figures show that only 4 per cent of HNWI’s net worth in stashed in collectibles. This may be due to their lack of liquidity. But still, cars, coins, stamps and art have equalled or outperformed prime property investment according to five global indices over one, five and 10 years. So maybe all those hours spent queuing at the Post Office for first editions when you weren’t a kid weren’t wasted after all. Go and dig them out.