The art of investing in collectibles

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In these volatile times, it’s understandable that investors are wary of putting their money into traditional stocks, bonds and funds. So, what are the latest luxury trends for those looking to purchase highly sought-after goods that might also, over time, appreciate in value instead?

We’re all familiar with the ‘putting all your eggs in one basket’ adage, one that can be neatly tied to investing and the importance of a well-diversified portfolio. Today, however, given the current state of affairs, many people are adding to the equation with a less traditional approach to growing their wealth – one that involves spending their money on tangible and highly desirable goods such as accessories, whisky and even NFTs. These items will not only bring the buyers joy in the short term, they could also prove to be profitable as and when they are sold in the future. Here, we explore what savvy investors are buying, and why.

When it comes to recent sales, a 1995 McLaren F1 in a ‘time capsule’ state with just 390km on the clock sold for staggering $20.5 million with Gooding & Company’s Monterey auction  – the highest price fetched by a car at auction in 2021. A 1955 Mercedes-Benz 300 SLR Uhlenhaut Coup, meanwhile, sold for a $142.3M USD.

And according to Knight Frank’s most recent wealth report, early supercars or motorsport homologation road versions – such as the Mercedes-Benz 190 Evo II, Lamborghini Countach, Bugatti EB 110, Porsche 959, Ferrari 288 GTO and BMW E30 M3 – are the cars that the experts predicts will fare particularly well in the future.

Handbags and gladrags

In 2021 alone, Hermès bags increased 17% in value. And in February of this year, The Telegraph stated that the price of a Chanel 2.55 handbag has soared a remarkable 50% since 2019 – from just under £3,104 to £4,583. That’s more than houses in the Cotswolds, which rose by 23% during the same period.

This boom looks to by no means be a flash in the pan trend, either. If we look back over the last decade, some brands have experienced a valuation spike of an average of 83%. By way of a comparison, first-edition books have increased by 42% and watches by 72%. Meanwhile, a 2022 study from the Business of Fashion said that 40% of US consumers had bought or were planning to buy a luxury handbag. This will help bolster the category from a global market of $72 billion this year to a predicted $100 billion in 2026.

In terms of investments that could prove to be lucrative, as well as the aforementioned Hermès and Chanel, Balenciaga, Dior and Louis Vuitton remain the most highly sought-after handbag brands.

The past five years has also seen an explosion in the rare shoes market, which is said to already be worth $10 billion and is predicted to climb to nearly $30 billion by 2030. A pair of trainers that Kanye West wore to the Grammys in 2008 fetched an incredible $1.8 million in April last year. And in September, it was announced that the auction house Christie’s is launching a new department to capitalise on the burgeoning market for collectible sneakers, streetwear and sports history.

The art of tomorrow

If you’ve yet to truly get your head around the Metaverse and nonfungible tokens (NFTs), now might be the time. Not only are they continuing to make headlines globally, but they are upending the art world and becoming a multi-billion-dollar industry at the same time.

NFTs started as a way to legitimise digital art and allow people to buy and sell ownership of unique digital items and keep track of who owns them. Technically, they can contain anything digital – from drawings and animated GIFs to songs or even items in video games; they can either be one-of-a-kind, or one copy of many, but the blockchain technology keeps track of who possesses the file.

This is a new market that is showing no signs of abating. In fact, it’s thought that the world’s main auction houses sold an estimated $235 million of crypto art in the form of NFTs last year alone, while more than $25 billion of NFT artworks were sold in total via online platforms. That being said, given its extremely early state, both caution and expertise is recommended when dipping a toe in the NFTs water.

A fine vine

Wine was one of the top-billing alternative investments in 2021. In July last year, a rare bottle of 1951 Penfolds Grange sold at auction for a record-breaking $122,001 – making it the most expensive bottle of Australian wine to ever sell under the hammer. The broader market, meanwhile, rose by around 1% per month on average, with Champagne and Burgundy doing exceptionally well – increasing 31% and 25% respectively.

It’s crucial to remember that that wine, unlike most other alternative asset classes, is not subject to tax. So long as you buy the wines in bond – meaning it is stored in a bonded warehouse approved by HM Customs & Excise – you don’t have to pay duty or VAT. And it isn’t currently subject to capital gains tax (CGT), either. This has in fact come under review several times in the last five years but the Revenue and the Exchequer are currently showing no interest in applying CGT to wine because it’s considered a chattel – or wasting – asset.

And although it suffered a slight dip in 2020, rare whisky has seen a 478% growth in value over the past decade. Christie’s sold a bottle for a whopping £1.2 million, setting a new world-record for a single spirit.

A driving force

Unlike wine, handbags and even toys, classic cars are one of the few collectibles that can be enjoyed – at least a little – without losing value. And while the majority of everyday cars depreciate almost as soon as they leave a dealership, classic ones appreciate over time owing to factors such as rarity, performance and occasionally provenance.

According to Classic.com, since June 2021, the top ten vehicle types produced return on investments (ROIs) that ranged from a 58% to a whopping 95%. It’s thought that online auctions were the main driver behind this trend.

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