Investors in fine wine will have been interested to see an article published in The Times this week which brought news of recent auction activity as well as discussing the fortunes of the fine wine market more generally.
James Reed, a director in Sotheby’s fine wine department is quoted as saying: “We have had two sales this year in February and March and both were roaring successes. It is not just a case of 98-99per cent selling; often the hammer price was towards the top or even above top estimate. Both times the sale room was very busy with active bidders, often new bidders.”
The article goes on to explain his view that ‘…wine is still seen as an attractive alternative investment that is less volatile than other markets; sterling is weak although optimists believe it will gain against the euro soon; people want to buy at the bottom of the market’ and, according to James Reed: “there is a shortage of stock, so people jump on what there is”.’
‘But although the credit crunch was slow to hit the wine market, it did hit, and between October and December there was a sharp fall in fine wine prices. Which might explain why buyers are returning to the market quicker than sellers. Justin Gibbs, a co-founder of Liv-ex.com, the fine wine exchange, says that the market fell 22.4per cent between June and December last year. However it has now risen 1.2 per cent with prices for top vintages, from 2000 and 2005, up 5 to 10 per cent this year.
The fine wine investment market tends to focus on the top vintages (2005, 2000, 1996, 1990 and 1982) of the five first growths (premier crus) from Bordeaux: Château Latour, Château Lafite Rothschild, Château Margaux, Château Haut-Brion and Château Mouton Rothschild and a few Burgundies, particularly Domaine de la Romanee Conti.
Over the medium to long term, the price of these wines tends to rise as supplies are depleted and demand increases – as more people from places such as Russia, China and India develop a taste for wine. For instance, a case of 1990 Château Lynch-Bages from Bordeaux cost £120 when it was released but is valued at £1,400 today.
Simon Staples, the sales and marketing director at Berry Bros & Rudd, the wine merchant, says that investors can still make money from wine but warns that newcomers need at least £10,000 “to register on the wine merchants’ radars”. As an added incentive as long as the wine stays in the warehouse it is exempt from duty and VAT; it is also exempt from capital gains tax.
But if you are tempted to start investing in these liquid assets you will find you are not alone. Mr Staples says: “Usually I would expect 20 new buyers a month to sign up to direct debt plans [cellar plans] to invest in wine but in February this figure rose to 101 and in March there were 52 new investors. The credit crunch means people don’t know what else to do with their money. They are interested in alternatives and looking to diversify.”’
Tags: Château Haut-Brion, Château Lafite Rothschild, Château Latour, Château Margaux, Château Mouton Rothschild, Fine wine investment, Liv-ex