Knight Frank Luxury Investment Index update 2014

One of my most interesting tasks each year is to update our Luxury Investment Index (KFLII) and take a look at the performance of things like classic cars, fine wine and art. What’s not to like!

This year has seen some stunning auction results, with new records being set for cars, coins and stamps.

To put things into perspective, for the £22.5m asking price of a rather nice house we are selling in Hill Street, Mayfair, at auction in 2014 you could have just about bought a 1962 Ferrari 250 GTO Berlinetta (pictured), about four of the world’s most expensive stamp – the  British Guiana 1856 1c black on magenta  sold by Sotheby’s for $9.48m in June (but only one exists so that could be tricky) – and the equivalent of 44 Edward VIII Gold Sovereigns, a rare example of which was sold by Baldwin’s for £516,000 in May.

Overall, however, the value of KFLII, which tracks a portfolio off nine collectables, rose by a relatively modest 6% over the 12 months to the end of June 2014.

Growth during the past five years has been 44% and over the past 10 years 182%.

This compares with a 10-rise of 135% by the top of the luxury London residential market. Only gold, with growth of 254%, has done better, but its performance has been far more volatile.

Capital appreciation of KFLII and other asset classes
  12-month 5-year 10-year
Furniture

-8%

-22%

-24%

Watches

3%

49%

65%

Chinese ceramics

-2%

43%

67%

Jewellery

0%

39%

163%

Stamps

3%

34%

195%

Coins

10%

90%

221%

Art

5%

17%

226%

Wine

3%

45%

226%

Cars

25%

111%

469%

KFLII (weighted)

6%

44%

182%

Gold

-2%

36%

254%

Luxury London homes

8%

66%

135%

FTSE 100

9%

59%

51%

This strong long-term growth shows why collectables such as art, classic cars and stamps, are increasingly being seen as an investment as well as just something desirable to own.

I was recently invited to speak at an alternative investment conference about the latest KFLII results. It was clear that the audience of wealth professionals were keen to work out how their clients should be buying into the trend!

However, people should not automatically assume that everything will go up in value, particularly sectors where fashion and tastes change.

Antique furniture, for example, has seen its value consistently eroded over the past 10 years, mainly because it no longer fits with the contemporary design aesthetic of modern homeowners.

However, as the chart below shows Twentieth century pieces have done better.

Budding collectors hoping for investment returns also need to do a huge amount of research. Our index can give an idea of a how a particular asset class such as art might be performing, but it will only reflect a slice of the market.

The HAGI classic car index that we use, for example, tracks the performance of the world’s most desirable cars. Not every old car will have risen in value to the same extent.

Even at the top of the market, the performance of the different marques, such as Porsche or Ferrari, will vary over time.

While the performance of some investments of passion can be less volatile than mainstream asset classes, such as gold and equities, not all sectors are immune.

Fine wine, while delivering very strong Five and 10-year returns, has had a bumpy ride over the shorter term following the sharp deflation of a speculative Bordeaux bubble, according to the results of the new Knight Frank Fine Wines Icon Index, created by Wine Owners.

Art has also been a top performer over the long-term, but some over-heated markets that readjusted in the wake of the financial crises are now finding their feet again.

 Download the full report for more analysis and data

Showing 2 comments

  1. Sam Shepherd

    #

    Excellent. After studying the Property Finance and Investment module as part of the RICS accredited Building Surveying course last year it’s nice to see some figures put amongst the theory. Everyone loves fact figures!

  2. Beatrice myers

    #

    Please add me to your distribution list

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