Christopher Silvester

INVESTMENT SPECIAL: Rising in the East

Chinese demand boosts returns for wine investors

The last time I wrote about wine for these pages, the global recession still lay ahead of us. In June 2008, fine wine prices were soaring on the back of the decision by the Hong Kong government to abolish import duty on wine (previously 40 per cent, and prior to that 80 per cent). The huge Chinese market was just starting to open up. Since then, wine prices have weathered the recession well, fulfilling the old adage that fine wine is the last asset class to fall in value and the first to rise.

With record auction prices recorded in Hong Kong in January — Andrew Lloyd Webber’s collection of 8,600 bottles sold for £3.5 million, well above the £2 million estimate — it is still the case that brand reputation trumps quality of vintage for many Chinese buyers. They are currently obsessed with leading Bordeaux brands from the left bank of the Gironde estuary. Right-bank wines have lagged in price, though some believe this represents a buying opportunity, especially as the Chinese palate develops and becomes less enslaved to Latour, Lafite Rothschild and Mouton Rothschild.

Also, prices are affected by cultural factors. For example, it is conceivable that prices for Lafite 2008 will outstrip those for the higher-quality Lafite 2009, for the simple reason that eight is a lucky number in China. Another factor is that the Chinese palate is more accustomed to harsher spirits, so they often drink claret younger than Western connoisseurs consider appropriate.

For those considering investing in wine, this is what you need to know. Buy Bordeaux and Romanée Conti wines only (most burgundies are produced in insufficient quantities to sustain an active market). Buy only first growths, ‘super seconds’, and a clutch of others. Expect annual returns of around 15 per cent — and remember that wine is treated as a wasting asset by the Revenue, so is free of capital gains tax.

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