The Fine Wine Investment Market

Fine Wine Investment Market Overview & Returns

Like any commodity, when demand is high and availability finite, prices rise. Over the last five years, prices on fine wines have risen by over 20% (Liv-Ex Fine Wine 100). Prices are still some way from the peak prices seen in 2011.

The 1990s saw global interest in wine investment increase significantly, as traditional markets in Europe and the US were joined by the extraordinary buying power of the far East. As a result, the fine wine market has seen price increases and decreases it had not previously known, creating both positive and negative press for the wine trade.

In 2009, stories of investors making 400% in 12 months on the 2008 vintage of Ch. Lafite Rothschild were completely true, though definitely not the norm, while those looking to invest now need to be wary of promises of the same happening again. In fact, the same 2008 Ch. Lafite Rothschild then saw decreases of 60% in the year 2011 to 2012, as the price slid from over £15,000 for 12 bottles to £6,000. It can be a volatile market; investing with a reputable and experienced merchant should be the number one consideration for all potential buyers. With 150 years of experience in helping our customers plan and build their cellars, Davy’s Wine Merchants are well placed to design a cellar for the future.

Knowledge of which wines and choosing the right moment to make those wines a part of your cellar is integral to building a successful collection. Though the sought-after region of Bordeaux will make up the foundation and probable bulk of a cellar, increasing demand in other regions means there is now more choice than ever before. As interest in luxury goods and a ‘quality not quantity’ mindset increases in younger generations, the number of people looking to build cellars for the future also increases. Whether for drinking or investing, when demand for a product with limited supply increases, prices move upwards and the scope of interest widens, meaning New World regions such as the USA and Australia enter the fold of investment grade wines. Increases in price on regions like Bordeaux and Burgundy also push interest into other old-world classics like Barolo, as collectors are priced out of their first choices. The more people involved in buying and selling of fine wines, the more it begins to behave like an asset class. Fine Wines are viewed as Veblen goods, and as such, the more prices rise, the more demand continues to increase. Although there has been some volatility, the wine market overall has been resilient; after all, it’s a tangible asset. As with any investment however, you should only invest what you can afford to lose.

With many wines only just entering their drinking window at 10 years of age, we would recommend an eight-to-10-year term for any investment – financial maturity will be linked with a wine’s drinking maturity amongst other criteria. As people begin to drink, the quantity of any given wine available on the market begins to diminish. Opportunities to purchase the best wines from a select few regions, such as Bordeaux and Burgundy, present themselves yearly in the form of En Primeur, where one can purchase the latest vintage while it is still in barrel, with a view to securing wines that may not be available at later dates, ideally at the cheapest price before the wines begin trading on the secondary market. There are plenty of opportunities to add wine with age that will hit that peak sooner, and this is an area that appears to represent immense value in the current market. Because of our history and enviable collection of older stock, Davy’s are well placed to source these wines for you. As provenance is now understandably one of the most crucial factors when buying fine wines, storing with a reputable merchant helps in keeping the condition and value of your wines. No duty & VAT is payable on wines you store under bond, until you decide to take delivery.

The UK’s impending departure from the EU and the financial implications of this, as well as a lull in world markets could lead to investors looking at alternative assets. With demand for the best wines in the world as high as we’ve ever known it, and while data from the industry’s leading index shows that prices are still some way off their previous highs, this certainly would appear to be an opportune time to begin building your wine cellar.

For more information about wine as an investment, or to start a portfolio, please contact us on 020 8 858 6011 or email privatecellars@davy.co.uk

The importance of choosing the right wines for your cellar

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