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Turning your passions into investment opportunities

Considering investing in classic cars or fine wine? These investments can provide a wealth of opportunities

Classic cars in a row parked on asphalt parking lot

This report is based on Knigh Frank’s latest Luxury Investment Index*

Wine, cars, watches and stamps have been enjoying High Net Worth Individuals (HNWI) interest for some time. It is estimated that almost 10% the HNWI wealth is allocated to these luxury collectibles.1

Although the car market has seen a sharp deceleration from the cumulative 458 percent growth rate achieved in the past decade (according to Knight Frank’s latest Luxury Investment Index), Dietrich Hatlapa of the Historic Automobile Group International (HAGI) noted “What these results show is that collectors are still prepared to pay premium prices to acquire extremely rare cars with impeccable provenance”. Wine has been on an uphill journey over the past 12 months showing a healthy 8% increase during that period.1

Wine as a serious investment will probably cost an investor at £5,000 to £10,000 to get going. This type of investment can be usually held for about eight to 10 years. Portfolio Adviser suggests that 60% of the buyers are based in the UK and Europe, while 40% are spread across the rest of the world, including 25% in Hong Kong.2

On the other hand, the resilience of the classic car market is undeniable as investors continue to dig deep into the most exclusive, niche and impeccably maintained vehicles consistently diversifying their portfolios.

A 1957 Ferrari 335 Sport was sold last year for over €32 million ($35.3 million) and a 1962 Ferrari 250 GTO Berlinetta for $38 million in 2014.. Modern classics – those produced after 1980 – have also been doing well. At a recent sale in London RM Sotheby’s sold a rare 1995 Porsche 911 GT2 for £1.85m, the equivalent of $2.4m.

Knight Frank’s Index states that “The increase in value of some of the most collected US cars has been far more muted than for European marks. In Hagerty’s Vehicle Rating guide to the cars that are most in demand from collectors, eight of the current top 10 are European or Japanese models.”1

It is apparent that although there is a state of flux in the investment market, classic cars and wine remain a long term investment, averting the volatility and entanglements of the stock market. With the increasing stamp duty and financial markets in turmoil, investors are looking for other sources of income but there can still be pernicious consequences if the right precautions are not taken. As with all investments, thorough due diligence on Tax liability is of paramount importance since some luxury items may have different tax treatment compared to other investments such as property or stocks and shares.3 4

The risks involved in investing in unregulated activities such as fine wines or classic cars should be thoroughly investigated before an investor parts with his or her money.5

Links

1 https://kfcontent.blob.core.windows.net/research/540/documents/ en/q2-2016-4164.pdf

2 http://www.portfolio-adviser.com/gallery/1032271/investing-fine-wine-classic-cars

3 http://pwc.blogs.com/private_business/2016/03/capital-gains-on-classic-cars-you-auto-know-the-facts.html

4 http://www.wsta.co.uk/publications-useful-documents/44-fine-wine-capital-gain-tax-and-inheritance-tax/file

5 https://www.ft.com/content/aafcdf64-f885-11e4-be00-00144feab7de

Always seek independent advice. This blog has not been approved as a financial promotion by Cogress Limited. We are not responsible for the content of external websites. Potential investors must rely on their own due diligence prior to investing.

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2017-06-20T15:25:49+00:00