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What are the rich and famous spending on?

Knight Frank's annual Wealth Report is out. What was 2016's appetite for luxury buying and investing, and what does it say for 2017? Excerpts from the review

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Knight Frank’s The Wealth Report 2017
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Fine wines

The Knight Frank Fine Wine Icons Index, recorded a blistering growth of 24% in 2016, compared to a relatively lacklustre 9% increase in the value of the HAGI Top Index, which tracks the performance of the world’s most desirable classic cars. This was driven by exceptionally strong growth in key areas across the world and the resurgence of the top Bordeaux chateaux. The top Bordeaux blue chips drove the entire market, growing 9% to the end of June.

The first growths rose a further 18% between June and November 2016, resulting in an annualised performance of over 30%. It is believed that Bordeaux will continue its upwards trajectory in 2017, although gains could be less broad based as buyers start becoming more focused on value. Prospects look favourable elsewhere in France too. A case of 1988 Romanée-Conti was the most expensive wine to sell at auction last year when it went under the hammer with Bonhams in October for £129,250. California (up 34% in 2016) also continues to defy gravity, driven by its cult wines. Northern Italy – and Piedmont in particular – also performed strongly.

Classic cars

For classic cars, “2016 was the year of the slowdown,” says HAGI’s Dietrich Hatlapa, adding, “Those who were in it just for the money have moved on. The market is now more in the hands of collectors and specialists.

There’s also a shift in interest towards new models like the Porsche 911R. But despite the slowdown, the rarest cars in the right condition with the most desirable provenance will continue to set world records. In the US, the annual Monterey sales also delivered new benchmarks. An historic 1962 Shelby Cobra went for over US$13m with RM Sotheby’s, making it the most expensive American car to sell at auction. A 1955 Jaguar D-type grabbed the record for the priciest British car to go under the hammer when it fetched almost US$22m. And, dispelling the myth that nobody is interested in older cars any more, Alfa Romeo joined the party with a 1939 8C Lungo Spider making just under US$20m – a new record for a pre-war vehicle. However, the most expensive car sold last year was the 1962 Ferrari 250 GTO. The price exceeded the highest sum ever paid at auction (US$38m for another 250 GTO sold by Bonhams) for a classic car.

Jewellery and Watches

The sparkliest was the sale of the Oppenheimer Blue, a vivid blue 14.62-carat diamond sold by Christie’s Geneva for the equivalent of almost US$51m, making it the most expensive jewel to sell at auction. After worldwide bidding, Bonhams London sold a 14.13-carat ring for £1.4m against a high estimate of £800,000. 

Male 'jewellery' also reached new heights. A rare stainless steel 1941 Patek Philippe ref. 1518 perpetual calendar chronograph with moonphases broke the record for the most expensive wristwatch sold at auction when it went under the hammer with Phillips Geneva for US$11m. Bonhams’ Global Head of Watches, Jonathan Darracott, says collectors are moving away from dress watches towards more functional ones, such as sports chronographs and military models.

Art market

Even the best efforts of wine and classic cars couldn’t prevent KFLII, which tracks the performance of 10 collectable investments of passion, posting overall growth of just 2%, its weakest performance since 2009’s 2% drop. The biggest contributor to last year’s slide was art, which dropped by 14% according to auction data analysed for The Wealth Report by Art Market Research.

European Impressionist painters, such as Matisse and Cézanne, saw the largest annual drop in the value of works sold at auction, while 19th-century artists like Constable and Turner rose by 19%. Modern and contemporary works, which have previously been the stellar performers recorded drops of 8% and 2% respectively. However, experts say auctions  only represent 45% of the market and there has been reluctance among vendors, perhaps concerned by Brexit and other economic worries, to consign their best works to auction. Buyers at the lower end and middle of the market have also become more circumspect. By the end of 2016, the market looked more positive. 

With permission: Knight Frank’s Annual Wealth Report

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