There is definitely a feeling of Spring in the air and of a turning point in the fine wine market. This Bordeaux Market Report from Jamie Strutt and Johnny Goedhuis explains why.
Over-View
The price of top Classed Clarets has fallen 20% to 30% in the past six months from its peak in June 2011. This is hardly surprising considering what has been happening with the European debt crisis and general slowdown in the world economy. However we believe that this is a healthy correction for the medium to long term future of the wine investment market. The unprecedented rise in wine prices between 2005 and June last year was not sustainable. During that time the Liv-ex 100 rose by 260% and many wines increased considerably more than this. Wine became the best performing asset class even out-performing gold. All vintages of Ch Lafite increased hugely in price driven by extraordinary demand from China. 2008 Lafite Rothschild, for example, made extraordinary gains in a very short period. If you were lucky enough to have bought this wine En Primeur in June 2009 it would have cost you £1,850 per dozen. In February 2011 it peaked at £15,000 and the price today is £7,700 IB so it is still showing a 300% return on the opening price.
Current Markets
Six months on we believe that wine prices have now started to stabilise. Since the beginning of 2012 the market has been more active and there has been a considerable increase in interest in the top wines.
The Hong Kong office reported that sales from our February Fine Wine List were the best since last June and the number of enquiries that they are receiving daily for First Growths and other top wines has returned to the levels of the first quarter of 2011. This view is supported by data from Liv-ex where the Liv-ex 100 managed a small gain in January 2012 and transaction volumes were the second highest since October 2010. We believe that we are close to or may even have passed the bottom of the market and there are going to be some interesting opportunities over the coming months.
What should you be investing in at the moment?
Our view is that it is the time to buy the top wines from the best vintages ignoring wines from the weaker years. There are clear signs that the Chinese market is becoming ever more discerning and has a better understanding of the quality of the different vintages which is likely to be reflected in prices. 2005 Bordeaux is one of the greatest modern day vintages, prices have fallen considerably from their heights and there is a clear buying opportunity. We also like 2000s which are drinking beautifully but unfortunately supply is beginning to be a problem. 1996 is a fantastic vintage and the wines are entering their peak of drinking. 1996 Margaux is an amazing wine, for some of us one of the best wines we have ever tasted. It is a wine that should be in any collector’s cellar.
Investors should not just concentrate their buying on the 1st Growths as demand for the Super Seconds and the “Flying Fifths”, Lynch Bages and Pontet Canet, and other established properties is likely to be very strong over the next year and this will be reflected in increased prices.
Goedhuis & Co
21st February 2012