20.03.2024
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Investing in luxury collectibles offers significant long-term returns, presenting investors with unmatched opportunities in the evolving financial landscape. However, navigating the path to successful investment in these tangible assets requires extensive knowledge and an acute understanding of the luxury market dynamics. This is where the Knight Frank Wealth Report comes into play.
The Knight Frank Wealth Report, a quarterly publication produced by the renowned real estate consultancy Knight Frank, is described as ‘the ultimate guide to prime property markets, global wealth distribution, and the threats and opportunities for wealth’. It delivers comprehensive insights into high-end investments, including fine art, rare wines, classic cars, and luxury watches. This report offers a blend of data-driven analyses, expert opinions, and market forecasts, designed to assist investors and collectors in making well-informed decisions regarding luxury assets. This is our by-category summary of the luxury collectibles section of the report for Q4, 2023, which was published in March of this year.
This is Part I of the summary.
Using data from Art Market Research (AMR), HAGI, Rare Whisky 101, and other reputable sources, the Knight Frank Luxury Investment Index (KFLII) provides an overview of the performance of various luxury asset classes across both a 10-year and a 12-month period. Over the last decade, the KFLII has experienced a substantial rise of +100%, although it saw a slight decline of -1% over the past year.
In the findings for Q4, art emerged as the leading asset class, witnessing a price increase of +11% in the last 12 months. Not far behind, jewellery and watches also showed strong performance, appreciating by +8% and +5% respectively. Additionally, wine saw a modest increase of +1%, while coloured diamonds appreciated by +2%.
On the other hand, despite an impressive appreciation of +280% over the past decade, rare whiskies experienced a decline in price by -9%, suggesting a potentially opportune moment for investment in this asset class. Similarly, cars and luxury handbags, which saw decreases of -6% and -4% respectively, might also present favourable investment opportunities while the market is in decline.
In the past year, art emerged as the leading category among the 10 Knight Frank indices, achieving an impressive +11% increase, the only category to reach double-digit growth in 2023. This performance underscores art’s longstanding reputation as a solid investment, as evidenced by its +105% rise in value over the last decade.
Despite this overall success, contemporary art from ‘red-chip’ artists, those born after the 1980s, experienced a decrease in demand and value, as highlighted by Sebastian Duthy of AMR. Nonetheless, the art market saw significant transactions in the works of ‘old masters,’ such as Bronzino. The highest-profile sale was Picasso’s ‘Femme à la montre,’ which fetched a remarkable US$139.4 million at Sotheby’s New York, showcasing the continued fascination with globally renowned artists.
In the last year, the luxury watch market demonstrated a strong performance, with the AMR watch index climbing by +5%. Amid a financialised climate, collectors gravitated towards iconic and scarce timepieces. Notably, a Rolex John Player Special fetched £2 million at Sotheby’s, setting a new record for the model. Classic Cartier watches also saw noteworthy price increases, especially those with unique asymmetric designs. According to AMR’s Sebastian Duthy, sales from the top three auction houses rose to around £488 million, encompassing both contemporary and vintage watches.
The auction value for the ten highest-priced watches reached £42 million, registering a +40% growth from the previous year. This selection comprised pieces by independent watchmakers Philippe Dufour, Roger Smith, and Richard Mille, alongside sought-after models from Patek Philippe, indicating a significant interest in distinct and exceptional models.
Investing in tangible assets like luxury watches is a strategic way to diversify and secure stable returns.
Over the past year, rare whiskies, despite a remarkable +280% appreciation over the last decade, saw a -9% decline in value, hinting at a potentially advantageous investment moment. Whisky’s performance in 2023, as Andy Simpson of Rare Whisky 101 explains, illustrates the complexity of the market and the importance of knowledge. The Knight Frank Luxury Whisky Index reported a nearly -9% decrease, with the worst-performing 50 bottles losing -26% in value.
However, the remaining 50 bottles gained +5%, and the top 20 performers saw a +20% increase. This variance underscores how important expertise is in selecting the right bottles.
At Timeless, we have achieved strong sales for some of our whiskies over the past year. Our team of experts have been quick to recognise market opportunities and trends in specific bottlings, leading to our investors enjoying returns of over +20% in just 6 months on our Bowmore Black 42YO. Find out more here.
Simpson believes that some significantly devalued bottles in 2023 are poised for a rebound in the next two years due to their rarity and current undervaluation. The top performer in this category was The Macallan Adami 1926, which fetched US$2.7 million at Sotheby’s, highlighting the potential for investors.
The fine wine market showed a modest increase of +1% over the past year. This, potentially, reflects a period of price adjustment, as suggested by Nick Martin from Wine Owners. This comes after a significant +146% growth over this past decade. Martin notes that some wines, particularly those from very small producers which had seen rapid price increases, are now experiencing notable declines. For instance, bottles that escalated from £50 to £200 or £300 have seen corrections. Despite this, the Knight Frank Fine Wine Icons Index (KFFWII)’s slight positive turn underscores the resilience and value of a diversified wine portfolio.
Highlighting the market’s high points, the top sale was five magnums of Romanée-Conti 1999, which sold for US$ 0.28 million at Sotheby’s, showcasing the enduring appeal and investment potential of rare wines.
Stay tuned for Part II.
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