'Investments of passion,' those objects of desire that are nice to own but will also hopefully rise in value. When I'm editing The Wealth Report, Knight Frank’s annual publication examining wealth distribution, the threats and opportunities for wealth creators, prime property markets and commercial real estate investments, 'investments of passion' is the section I most enjoy.
My own advice is buy what you love and if it goes up in value so much the better, but some people do look at these things from an investment perspective. So, if that’s your thing, what should you be looking at?
Well, according to the Knight Frank Luxury Investment Index (KFLII) which tracks the value of 10 of these desirable asset classes, wine was the top performer last year. Based on the performance of the Knight Frank Fine Wines Icons Index, compiled for us by the team at Wine Owners, investment grade wine saw a huge surge in value last year – up almost 25 per cent across the board.
Over to Nick Martin of Wine Owners to explain this stellar rise, which was driven by exceptionally strong growth in key areas across the world and in particular the resurgence of the top Bordeaux chateaux that form the backbone of most investment cellars.
'In 2015 we saw growth of around 8 per cent for the whole of Bordeaux, off the back of steep declines in 2012-2014 following the bursting of the Chinese-induced Bordeaux bubble in late 2011. But 2016 was completely different. The top Bordeaux blue chips drove the entire market, growing 9 per cent to the end of June.
'Brexit turbo-charged the market due to sterling’s devaluation, feeding more positive sentiment into a market that had already been gathering significant momentum. The first growths rose a further 18 per cent between June and November 2016, resulting in an annualised performance of over 30 per cent.'
So should we expect further growth in 2017 or is it too late to jump on the wine jalopy? I’m not allowed to give investment advice, so I’ll defer to Martin who reckons Bordeaux will continue its upwards trajectory in 2017, although gains could be less broad based as buyers start becoming more value focused.
Northern Italy – and Piedmont in particular – is also one to watch, he says. 'The qualitative improvements in Barolo and the similarities in market development to Burgundy a decade or two ago, have captured the imagination of the collector community. The market rose 28 per cent and is likely to perform similarly over the next year.'
So what about classic cars, the top performing asset in KFLII, over the past few years? Even though they’ve been knocked off pole position by wine, they’re still doing pretty nicely thank you. On average, according to the HAGI index that we use, the most desirable cars rose in value by 9 per cent last year.
My friendly car guru, HAGI’s Dietrich Hatlapa, says the market is cooling slightly as investors 'just in it for the money' move on, providing opportunities for genuine collectors. That has hit the value of some cars that while still gorgeous, are not especially rare. Think certain Aston Martins and Mercedes.
However, don’t think that the enthusiasts aren’t prepared to dig deep for the rarest models in the best condition and with the right provenance. Ferrari 250 GTOs are still leading the market – one was sold privately for over (possibly well over) $38 million last year – while a 1955 Jaguar D-type set a record for the most expensive British car to be sold at auction when it went under the hammer for a cool $22 million.
So, there you have it, cars and wine, the top performing investments of passion in 2106. Just don’t enjoy them both at the same time.
Andrew Shirley is Knight Frank's Wealth Report Editor
For more bling and glitz (and some serious stuff as well), you can download a copy of The Wealth Report here: www.knightfrank.com/wealthreport