Coutts: Value of classic cars drops in 2016 but annual return ‘still 14.2% since 2005’

It’s probably a good thing many of those who choose to “invest” in classic cars also happen to enjoy driving them and owning them, Coutts & Co’s latest ‘Objects of Desire’ Index suggests – since the value of such automobiles from an investment perspective fell by 10.4% last year.

Rare musical instruments on the other hand, the Coutts data shows, have taken top place in the index this year, rising by 16.4%, although this is apparently a volatile “asset class”, given that this followed an 11% drop in the price of these particular “passion assets” in 2015.

Meanwhile, classic cars still retain their position as the top-performing passion asset class in the Coutts’ Index over the 12 years the UK private bank has been tracking 14 passion assets, up by more than 330% during that time. The average cost-adjusted annual return of classic cars investments was 14.2% between 2005 and 2016, the Coutts data shows.

The Coutts Index capturess the price return in local currency, net of holding costs, of 14 passion assets across two broad categories – trophy property and alternative investments..

The alternative investments category include fine art, collectibles and precious items, while the trophy property category is split between “billionaire property” (primary homes) and “leisure property” (second and holiday homes – in ten global capital cities).

Overall, the value of passion assets last year grew by a modest 1.2%, although the sector has risen by nearly 77% since the beginning of 2005, Coutts noted in a summary of its findings.

Returns since 2005 (in local currency
and adjusted for costs)

 

 

 

 

 

 

 

 

 

 

 

 

Coutts & Co managing director Mohammad Kamal Syed noted that “provenance and rarity” continue to be the two factors that are pushing prices higher in the passion assets area.

“Classic cars have provided the healthiest returns since 2005, with average prices rising more than fourfold,” he added.

“However, after increasing rapidly in 2013 and 2014, price returns for classic cars fell in both 2015 and 2016. Moreover, this reflected falling auction prices for nearly all models in the index, [although] prices at the very top end of the market remain robust.

“2016 saw the highest ever price paid for a Ferrari 250 GT, with a rare 1961 SWB California Spider barn-find fetching US$18.15m.

“More recently, a new world record price was set in August 2017 for a British Automobile (1950’s Aston Martin DBR1 at $22.55m).

“The most coveted cars continue to go up [in price],  and the gap between the very best and average only widens.”

Other highlights of this year’s Coutts’ Objectives of Desire Index:

  • Rare coins remain the only asset class to have enjoyed price surges every year since 2005, with an annual 11% increase on average. The category saw a 5.3% yoy rise in 2016
  • After a four-year period of contraction, fine wine prices were rose last year, by 9.6%
  • Fine art investments, however, didn’t fare well in 2016, as  all the sub-segments faced a slump in value (Impressionist and modern art by 7.9% , old master and 19th century pieces by 4.3%, post-war and contemporary works by 6.1%, and traditional Chinese works of art by 5.8%)
  • The impressionist and modern art category suffered the largest value decrease in 2016, to stand 12% below its 2007 peak, the Coutts data shows; while the value of masterpieces from the old master and 19th century segment has decreased by 42.1% over the 12-year period covered by the Coutts Index
  • In the category of “precious items”, jewels prices leapt to a new high last year, up 12% in value compared to 2015, and up 150% since 2005
  • Billionaire and leisure properties rose last year by 1.8% and 1.5% yoy, respectively, in price terms.

To read an argument for classic cars as “portfolio diversifiers”, as explained here last month by Hugo Reyneri, portfolio manager and co-founder of car investment firm Honoris Cars, and Filippo Pignatti Morano, manager of the Classic Car Fund,  click here.

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