Great returns with classic cars and vintage wines
Steve McQueen would approve. If you had invested £100,000 (RM636,000) in a classic car – hopefully a Ferrari – 10 years ago, it would be worth more than £500,000 (RM 3.1 million) today.
The returns from backing Warren Buffett, widely acknowledged as the world’s greatest investor, pale by comparison. That £100,000 placed in his Berkshire Hathaway investment vehicle in September 2005 would be worth a little over £280,000 (RM 1.78 million) today. Classic cars win by several laps.
“There is nostalgia for when people were younger and had the poster of the car on their bedroom walls,” said Dietrich Hatlapa, founder of the Historic Automobile Group International, explaining the level of demand. “These cars are the entry tickets to a lifestyle, where at the top end of the wealth sector they represent five-star stuff.”
Tax breaks also play a part. Classic cars – and wine (as long as it is stored in bonded warehouses) – are exempt from capital gains tax, as they are deemed a “wasting asset” by HM Revenue & Customs.
“Classic cars are going through the roof at the moment,” said Toby Matthews, a solicitor at QualitySolicitors Truemans, a law firm in Oxford. “It is because they’re now a safe investment. If you can get one of these classic cars, then fantastic: you’re going to be able to buy and sell it without getting hit by capital gains tax.”
For Mr Hatlapa, though, passion wins over tax. “It is one attraction of the asset class,” he said. “But it’s nothing new; it’s always been the case.”
More than 5,000 classic cars worth a total of $1.2bn (RM 5 billion) have changed hands during the past 12 months. “Only about 225 of those exceeded $1m (RM4.2 million), so the performance is at the very top end of the market,” said James Knight, group motoring director at Bonhams, the auctioneer.
The relaxation of the rules governing pensions could also encourage more people to snap up classic cars or vintage wines. Steve Webb, when pensions minister in 2014, joked about the possibility of people spending their pension pot on a Lamborghini. In fact, they should look into buying a vintage Ferrari, Mr Hatlapa said. A 1962 Ferrari 250 GTO Berlinetta sold at auction last year for $38m (RM 160 million).
Not even gold can compete. During the same 10-year period, £100,000 invested in the precious metal – the classic haven in troubled times – would be worth slightly more than £310,000 (RM 1.97 million). And that other booming asset – a prime property in central London – is also up, but still recovering from the credit crisis of 2008-09. According to Knight Frank, the estate agent, the price of an average top-end London residence increased 133 per cent during the decade.
Equities also failed to deliver such stellar returns: £100,000 invested in the FTSE 100 in 2005 would have grown to a relatively modest £161,000 (RM 1 million) by the end of September this year.
Wine, art and coins had a good decade, up by 243 per cent, 239 per cent and 232 per cent respectively, according to the Knight Frank Luxury Investment Index.
“We’ve seen tremendous results for the ‘best of the best’ at auction,” said Melanie Clore, chairman of Sotheby’s Europe. “Works of rarity, quality and with a distinguished provenance will always appeal to the discerning collector.”
With the €51bn (RM 235 billion) art market booming, experts are now seeking the overlooked – and underpriced – artists of the past century, said Martina Batovic, a specialist in postwar and contemporary art at Bonhams. “Clients are very widely spread globally and very discerning,” she said. “What excites collectors is something fresh to the market that has not been seen for many years.”
