Wealthy South Africans are increasingly lifting their noses into the world of luxury investments, where art, classic cars, and rare whiskies titillate the senses and eye for value.
Fine wine, however, is the luxury of choice for the country’s well-heeled.
The Knight Frank Luxury Investment Index (KFLII), which tracks a weighted basket of 10 collectibles, reveals that investment in these items has risen by 7% from June 2022 to June 2023, which is more than house prices in Prime Central London; art, jewellery, and watches have been the flavour over the past 12 months.
Coins, cars, wine, colour diamonds, and handbags have also seen increased investment, although there has been a general slowdown across all these collectibles.
When it comes to fine wine though, there has been no slowdown for South Africans as, although this collectible has seen just a 5% increase in global investment from June 2022 to 2023, it has grown by 11% in the country.
Nick Martin of Wine Owners, which compiles the Knight Frank Fine Wine Icons Index, says Burgundy has been the big success story of the past decade, with prices having escalated 367% by the second quarter of 2022. However, the top of the Burgundy market peaked around that time and has since fallen by at least 9%, and as published prices tend to lag realised sales, this indicates that there is further to fall.
“Whereas Burgundy is scarcity led, Champagne is a high-volume market, with certain prestige brands’ production running into the several million of bottles per vintage release. Prices of some of those prestige cuvées have been testing price elasticity of demand and seen sales stagnate as a result.
“Against this backdrop, the KFFWII, benefitting from its globally balanced index composition, has risen 5% in the past year and is flat year to date. Nevertheless, the heightened cost of capital may well act as drag on blue chip fine wine markets for the rest of 2023.”
When interest rates have risen sharply to around 6%, new releases in particular, according to market economics, should be offered at a bigger discount to future value in order to convince consumers to spend on wine instead of holding cash, he says. If wine markets are looking toppy with limited obvious upside for new releases, there’ll continue to be downward pressure exerted on secondary market prices more widely.
“Some markets like South Africa (+11%) and Australia (+8%) have, however, seen strong growth this year.”
Globally, art leads the collectibles basket, with a 30% increase in investment, followed by watches and jewellery, both at 10%. The items in the basket, and their rates of investment are:
While art tops the Index with 12-month growth of 30% as measured by AMR’s All Art index, auction results so far this year suggest growth has peaked, says AMR’s Sebastien Duthy.
“The auction season’s spring sales are the first measure of market confidence and recent results suggest growth is already starting to slow.”
Watches and jewellery investment rates show that people are still willing to spend on personal luxury items.
The performance of classic cars has been mixed, says Dietrich Hatlapa of data provider HAGI.
“After a strong performance in 2022 when the value of the most investable classic cars rose by 25%, this year has seen the market slip into reverse gear due to macro-economic factors.”
Andrew Shirley, editor of the Knight Frank Luxury Investment Index says economic uncertainty and higher interest rates will cast a long shadow on luxury collectibles.
“Novice collectors should focus on what brings them joy, perhaps that’s more important now that value appreciation is far from guaranteed in these asset classes.”
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