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Offbeat investing: are collectibles a serious investment?

From coins to jewellery and cars to wine, some serious collectors are getting back as much as they’re putting in and much more. But, just as with any investment, there are rules and risks.

We all think our prized collection of teapots/vintage cars/comic books is worth a bomb but how much will it really contribute to a retirement strategy?

Collectibles can be a fun, and sometimes profitable, way to diversify your investment portfolio by introducing another asset class. Investors who think outside the box are amassing everything from original iPods (which can bring in as much as $20,000), to classic car hood ornaments, Japanese robot toys, comic books and whiskey.

It’s not usually a serious strategy for funding your retirement, but it can be lucrative and a great way to meet people who share your passions.

But there’s another level of collectors chasing the items that have been outperforming traditional asset classes. For example, those looking to take quick profits over the past 12 months would have been in wine, which saw a 25 per cent increase in value thanks to strong growth in the Bordeaux, Burgundy and Italian investment-grade markets, according to the Knight Frank Luxury Investment Index1. It’s not a flash-in-the-pan. Wine investments recorded an increase of 61 per cent over five years and 231 per cent over ten years.

Meanwhile, art delivered a seven per cent return in the past 12 months, 11 per cent over five years and 113 per cent over 10 years.

Mid- to long-term investors, however, may have had better results from cars, which saw 117 per cent growth over five years and an astonishing 362 per cent over ten years, but only two per cent in the past 12 months, the Index records.

Some models have performed well for years, says Christophe Boribon, National Auctions Manager at Shannons Auctions. Shannons specialises in vintage, classic and sporting vehicles as well as motoring memorabilia.

“For example, we have seen a significant growth among some 1960s and 1970s makes like Aston Martin, BMW, Mercedes-Benz, and Porsche over the past decade,” he says.

Early Jaguar E-Types have “doubled and in some instances tripled in value”, says Boribon. Local Australian muscle cars have also experienced strong recent growth. In some cases, prices have been higher than those before the global financial crisis.

“There’s not much out there that you can say has appreciated like that,” he says.

Obviously, returns depend heavily on the type of the car. “It’s similar to buying an apartment or house. Some suburbs will have a greater yield and a better return than others. Some cars will, over time, appreciate more and some may not move at all,” he says. And, like a house, there are ongoing costs – such as maintenance, storage, registration and insurance – that will eat into any gains.

We’re seeing the trends in collecting change from generation to generation, so it’s about trying to keep abreast of these trends to try to identify the next vehicle that might take off.

Looking at the big picture

Good returns are possible in the Australian art market but some serious investors tend to gravitate to the international scene where the markets are worth billions of dollars, says Chris Deutscher, a 35-year veteran of the art dealing, auction and valuation market.

“In the Asian, American and European markets, you see professional investors and dealer investors. And you even get people influencing auction outcomes by collecting particular artists in depth and slowly releasing their works at auction over time. It’s a very sophisticated way of doing business,” says Deutscher from Deutscher and Hackett.

“In Australia it’s more fickle. You’ll have an artist like Tim Maguire, who was fashionable back in the 1980s and 90s, on a very steep upward trajectory. Then, all of a sudden, supply overtakes demand and the prices drop quickly because too many works have been put on the market,” he says.

By comparison, the works of popular contemporary artist Del Kathryn Barton are rarely seen at auction. “So, if something came up now that was fairly special it could bring $200,000 or $300,000 whereas only 10 years ago it might have been around $5,000.”

“But over the decades art has proven to be an outstanding investment, particularly at the high-quality end,” says Deutscher.

Research is crucial

It goes without saying that, just like any investment opportunity, research into markets and trends is crucial when it comes to collectibles.

“We’re seeing the trends in collecting change from generation to generation, so it’s about trying to keep abreast of these trends to try to identify the next vehicle that might take off,” says Boribon.

“At the moment we’re seeing that Gen Xers [35 to 45 years] are very much into the 1970s and 1980s cars. I call it the ‘poster wall’ generation – it’s the bikes and cars they had on their bedroom walls growing up. And they get to a certain age in life where they have the disposable income to put towards that car or bike,” he says.

Gathering knowledge of a collectibles market can be tricky at times but Deutscher’s tip for aspiring art investors is to research Australian art history by heading off to your nearest state gallery or the National Gallery of Australia in Canberra.

“Set your standards at that sort of level, and become familiar with artists’ best periods and subjects. Then watch how they perform at auction because you’ll find wild fluctuations in prices.”

For example, a painting by modernist Ralph Balson might bring $6,000 but another Ralph Balson, considered ‘better’, might bring $300,000, says Deutscher.

Enjoy the ride

For many, the difficulties of researching collectibles markets and the sometimes fickle market conditions may mean that the hoped for profits aren’t to be found. The consolation for Boribon is the ‘world’ you’re buying into.

“It’s not just investment, it’s the social aspect of where you meet a lot of like-minded people with similar cars. There have been some amazing friendships develop over the years from people who’ve bought classic cars or bikes. That’s probably one of the important points I see in it,” he says.

“And, if you haven’t made the money on the car, what you’ve got is the enjoyment of using and driving it. You can’t drive your shares or your house, but you can drive your car and ride your bike.”

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