_Cars and wine battle for pole position in investment race 

Rubber-burning price growth means classic cars have dominated the Knight Frank Luxury Index (KFLII) for the past decade, but since early 2016 wine has accelerated rapidly and has now overtaken them. 

The value of the Knight Frank Fine Wine Icons Index rose by a sparkling 24% in the 12 months to the end of March 2017, while the HAGI Top Index, which tracks the performance of the world’s most collectable cars, managed a relatively modest rise of just 6% over the same time.  

Credit: llxcarrental

Resurgent demand for Bordeaux and Burgundy wines, amplified by the decline in the value of sterling, has helped to boost the market, says Nick Martin of Wine Owners, which compiles our Fine Wines Index. 

Catastrophic frosts that affected up to 80% of the crop in the best Burgundy vineyards mean there is very little stock of the 2016 vintage, says Mr Martin. “A lot of the growth has come on the perception of scarcity, but the most sought-after Burgundies ,ight have hit a peak and it feels a bit toppy to me."

Bordeaux, however, could still have some more momentum this year, he reckons. “It will be more muted than in 2016, but the market is still playing catch up after three years of miserable declines.” Much will depend on the Chinese economy – the very top end of the fine wine market is driven largely by Chinese buyers – and the strength of sterling due to the importance of London as a global fine wine secondary market trading centre, says Mr Martin.

Although lagging some way behind wine, the performance of classic cars still looks very healthy when compared with many other asset classes. But nonetheless the latest figures mark a sharp slowdown for a market that has routinely delivered yearly rises in the high teens. 

A good indication that buyers have become more reticent is the lacklustre sell-through rates and number of cars not fetching their low reserves at some recent high-profile auction sales. 

At RM Sotheby’s Villa Erba sale on the shore of Italy’s Lake Como, for example, only 58% of the cars going under the hammer found a buyer. In the equivalent auction two years ago almost 90% of the lots were sold.

Too many auctions and too few really good cars being put up for sale, aren’t helping, reckons Steve Wakefield of dealer and industry analyst Kidston, who says this year’s series of autumn auctions will be an interesting test of the market.

“There are a lot of  sales coming up including three alone on the weekend of the 9th and 10th of September - including a special Ferrari-only 70th birthday auction at Maranello - which come hot on the heels of the classic car calendar’s highest profile auctions at Monterey in California.”

But really rare cars – both old and more modern - are still routinely selling for millions of pounds, euros or dollars, and even those that are not quite so hard to come by are selling well if vendors are prepared to take a view.

At Bonhams’ Greenwich Concours sale in the US on 4 June, 83 out of the 90 cars on offer went to new homes. This was largely because a significant number were offered with no reserve, points out Mr Wakefield, who believes sellers in the US tend to be more pragmatic than those in Europe.

“

, and it’s worth noting that auctions only make up about 25% of the market,” says Dietrich Hatlapa, the founder of HAGI. “People just need to be more realistic. There was a bit of disappointment that a much-hyped, virtually un-driven 1993 Porsche 911 Carrera RSR didn’t make its high estimate at Villa Erba, but it still sold for over €2m, which is a lot of money for a car that will lose a lot of its value if you even drive it.”

An even younger Porsche, a striking 2015 918 “Weissach” Spyder, made almost €1.5m at the same sale.

"Whilst the recent lack of performance may disappoint some people, we regard it as generally benign and beneficial for the long term health of the market. It’s a very exciting time to engage with the market because the balance has shifted in favour of the buyer,” adds Dave Selby, a senior researcher at HAGI. 

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^{Image of Porsche 918 "Weissach" Spyder, sold at Villa Erba auction May 2017 for €1.46m, courtesy of RM Sotheby's}