A common criticism of the pre-crash economy was that people didn’t understand what they were investing in. Reports of complicated strings of deals being unravelled in financial centres all around the world did nothing for the reputation of investment banks, who had previously dazzled the markets with the complexity of their deals.
Bonds and other debt related products were so far removed from an actual, tangible thing that investors felt confused and unsure about where to invest next. This sentiment may perhaps explain why property markets have recovered more quickly than expected. After all, what is more tangible than bricks and mortar?
But recent results from the Liv-ex 100 (the main fine wine index), have shown that investors may now be branching out into other assets that they can grasp – and taste!
For the past 14 consecutive months the Liv-ex results have shown a steady increase in prices. In May alone prices rose by 4.4%. On one day alone in Hong Kong, sales went through the roof. An Acker, Merrall and Condit auction raised HK$152 million (a record breaking amount), and a Christie’s auction raised HK$40 million.
The wines that dominated the sales were French in origin, but given their age this is no surprise. Perhaps in the next couple of decades vintages from the New World may also become more valuable to reflect modern drinking preferences. Either way, the trend towards wine looks set to continue.
What explains this growth? Demand is on the rise from the emerging markets and has remained steady in places that are more traditionally interested in buying fine wines, including Europe and the United States. However, the supply remains finite – new vineyards realistically take decades to become established and there is a limit to how much grape harvests can be improved.
However, a sobering thought for UK resident wine enthusiasts was the CGT rise for higher rate taxpayers in Tuesday’s Budget.