Art Leads "Investments Of Passion" But Luxury Sector Has Muted 2023

Tom Burroughes Group Editor March 1, 2024

Art Leads

While the world of art investment set strong figures for 2023, the overall picture for luxury items and and collectibles, such as fine wine, classic cars and apparel was muted last year, according to Knight Frank.

Art posted the highest gains of “investments of passion” – rising 11 per cent in 2023, but broader luxury sector figures suggest a muted year overall, according to Knight Frank, the real estate consultancy. 

Luxury areas slightly lost momentum last year as tracked by the Knight Frank Luxury Investment Index (KFLII), which tracks the performance of 10 popular investments of passion. Prices on average fell 1 per cent across the index. 

The performance of luxury/collectible sectors, while colorful in their own right, also act as barometers for the mood of high net worth individuals more broadly – an important matter for wealth managers and advisors to track. (Yesterday, the organization also reported that the number of ultra-high net worth individuals rose last year, buoyed by rising markets.) On a related matter, those who own luxury/collectible items are vulnerable to theft. This news service has written about how HNW individuals should guard against these problems.

Art was the only one of Knight Frank’s 10 index constituents to hit double-digit growth in 2023. All the gains came in the first half of the year with values sliding significantly later, according to AMR’s All-Art Index. Jewelry (8 per cent), watches (5 per cent), coins (4 per cent) and color diamonds (2 per cent) make up the top-five best performing assets with rare bottles of whisky (-9 per cent) the worst performer in the index. 

“The priciest bottle of Scottish whisky, the most expensive Ferrari 250 GTO, the costliest blue diamond, even the dearest sword – in 2023, the major auction houses achieved a string of record-breaking sales,” Andrew Shirley, editor of the Knight Frank Luxury Investment Index, said. “It sounds like a bumper year for luxury investments, however the KFLII reveals a less positive picture. KFLII edged into negative year-end territory in 2023, albeit by a fraction of a per cent, as several stalwart members of the index dropped into the red or showed minimal gains.”

Classic cars came in just above whisky as the second worst performing asset class in the index, decreasing in value by 6 per cent over 2023. 

“The value of the HAGI Top Index was up 22 per cent in 2022, so a retreat of 6 per cent isn’t all that bad,” Classic car expert Dietrich Hatlapa, said. “The strong performance of other investment classes such as equities may have dampened collectors’ appetites – it’s a very small market so it only takes a minor change in portfolio allocations to have an effect, and there has also probably been a degree of profit taking. However, we have seen some marques like BMW (+9 per cent) and Lamborghini (+18 per cent), which appeal to a younger breed of collector, buck the trend in 2023.”

Handbags (-4 per cent), which topped KFLII just a few years ago, were also notable fallers. Sebastian Duthy of AMR, which supplies data for several asset classes tracked in the KFLII, said bags are one of the investments of passion more influenced by the retail market. 

Fine wine
The market for fine wine – rising 1 per cent according to the Knight Frank Fine Wine Icons Index (KFFWII) – is going through a period of price correction, Nick Martin of Wine Owners, said. “It’s been a hell of a long run, so I’m not that surprised.” Some wines from very small producers that had enjoyed the most exuberant growth have seen the biggest drops. It had got a bit silly, £50 bottles ($63.32) had shot up to £200 or £300.” 

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