Art Leads “Investments Of Passion” But Luxury Sector Has Muted 2023

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 accessories 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 colourful 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 organisation also
reported that the number of ultra-high net worth individuals
had risen last
year, buoyed by rising markets.) On a related matter, those
who own luxury/collectable 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. Jewellery (8 per cent), watches
(5 per cent), coins (4 per cent) and colour diamonds (2 per cent)
made up the top-five best performing assets with rare bottles
of whisky (-9 per cent) being 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 also 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.”