Fine Wine can be a worthwhile investment if the view on this investment is to gain over the medium to long term.
Points to Consider:
Historically, investment in the Bordeaux wines from the 1855 classification, the wines from leading burgundian domaines, such as Domaine Romanee Conti, Vintage champagne from the `Grand Marques’ houses and more recently selected estates in Piedmont and Tuscany in Italy, have established a proven, successful track record in terms of investment returns, I repeat, over the medium to long term.
An advantage of investing in fine wine is that it is viewed by HM Revenue & Customs as a `wasting asset’ and therefore, in general, is exempt from Capital Gains Tax. Please consult your personal Tax advisor for confirmation of your individual tax situation.
In the mid 2000’s, there were many new companies selling wine as an investment, particularly after the 2005 Bordeaux En Primeur campaign in 2006. These companies offered huge financial gains to potential investors. Indeed had one invested in the 2005 Bordeaux vintage, buying En Primeur (i.e. 18 -24 months before bottling) from a reputable wine merchant, then solid gains of between 40% to 50% could have been made over the next 5 years.
Had you, however, bought from a `new company ’, which had little previous knowledge of the industry and who sold the wines at inflated prices, I doubt that you would have made any gains at all. In the period 2010 to 2014. 50 new companies that had started up trading in fine wine following the successful 2005 Bordeaux En Primeur campaign closed their doors either following the bank crisis of October 2008 or the severe market correction in 2011, with many investors losing much or all of their invested money.
It is important to choose an established Fine Wine merchant to guide you through the difficult choices.
My personal view is that the next 12 months will be a good time to re-enter the fine wine investment market, as there are numerous buying opportunities.
In the period from 2010 to 2014, there has been a major market correction in the International Fine Wine market, especially for the wines from Bordeaux. Over inflated prices, (especially the prices released by the Bordeaux chateaux for the 2010 vintage En Primeur) were unsustainable and from the market highs in mid 2011, many vintages of the 1st growth Bordeaux chateaux, have lost between 30 – 40% of their values. All markets are cyclical, but not many in the International fine wine trade had anticipated such a major decline to the Bordeaux element of the market.
That said, there are brighter parts of the market and in particular Burgundy, where selected Premier Crus and Grand Crus from well known domaines have performed well in the past 5 years and in my opinion, will continue to perform well.. There have been significant price increases for the rarer wines, i.e. those produced in smaller quantities. So the leading Domaine of Burgundy, Piedmont, Tuscany, some boutique wineries in the USA and vintage Champagne as well as some selected older Bordeaux vintages will continue to rise in price as global demand continues.
Now is a good time to invest in fine wine as there are buying opportunities and prudent selection should bring healthy returns with little or no capital gains tax to pay over the medium to long term.
If you would like to discuss the possibilities of careful fine wine investment and need some guidance, please call me or send me an email.