High-octane dividends for investors
Classic cars far outperform other luxury investments, reports Steve Colquhoun.
Looking to splurge on an emotional investment that will quadruple your money in 10 years? Forget watches, stamp collections or even fine art. Buy a classic car.
Not just any old banger will do, though. According to the annual Knight Frank Wealth Report released this week, a "truly investment grade car" bought in 2002 would have appreciated by up to 395 per cent over the past 10 years.
That makes cars easily the best "passion" investment you can make, well and truly outperforming popular luxury items such as fine art (199 per cent), jewellery (140 per cent) and watches (76 per cent).
The most sought-after cars tend to be Ferraris, with a 1957 Ferrari 250 Testa Rossa holding the world record of $US16.39 million ($A16.02 million). Classic Aston Martins, Mercedes-Benzes and some pre-war Bugattis, Alfa Romeos and Rolls-Royces can also fetch prices in the millions.
Knight Frank's Luxury Investment Index assessed nine different forms of "collectables" over the past decade and found that cars outperformed coin collections (248 per cent) and stamp collections (216 per cent) for return on the initial investment.
The results are at odds with the popularity of each class of collectables, with Knight Frank finding that fine art was the most-collected commodity, ahead of watches and fine wine. Classic cars were the fifth most popular collectable, although the index forecasts they are growing in popularity with "HNWIs" - the high net-worth individuals who are the focus of its study.
"In our Attitudes survey, stamps and coins were the least-collected items by HNWIs," the report says. "Watches polled second only to art, but showed a comparatively lowly 10-year rise in value of just 76 per cent.
"The disparity shows the often blurred dividing line between investments and passion. While many HNWI watch collectors may believe, or at least hope, that their acquisitions will be a good investment, the reality may disappoint."
Paul Maudsley, head of the watch department at auctioneer Bonhams, says that like classic cars "the actual number of watches that will increase in value is somewhat limited and largely restricted to vintage watches and some modern models by Rolex and Patek Philippe".
"Paying £150,000 retail for a new watch is rather like buying a luxury car. Its value will fall as soon as it leaves the showroom and, with the exception of a Patek Philippe, is unlikely to ever be as high again."
However, investors need to do their homework before diving into the collectable market chasing high returns, cautions Greg Davies, of Barclays Wealth and Investment Management. "People often think these types of investments are more transparent and less complicated than traditional investments. In reality, they are generally less regulated, and can be illiquid, expensive to trade and sometimes actually more difficult to understand unless you have a high level of expertise or inside knowledge," he told the report. Art is a classic example. "The huge diversity of the market, the fact that no two original works of art are the same ... mean even the most rigorously constructed index can only provide a small, and curated, glimpse of the market."
Knight Frank Luxury Investment Index
%change in sterling value
to end ofQ32012
Classic cars +395%
Fine art +199%
Fine wine +166%
Chinese ceramics +85%