_Hermés handbags tops Knight Frank Luxury Investment Index with prices up 17% in 2020

Handbags topped the Knight Frank Luxury Investment Index (KFLII) for the second year in a row, with prices up 17% in 2020.

An established online auction presence and the appetite for relatively affordable luxury pick-me-ups during the pandemic, particularly in Asia where many bag collectors are based, helped the asset class retain pole position.

The next best performing luxuries last year were wine (13%) and cars (6%).

Fine wine comes in second place in the KFLII. Following a year of consolidation, wine markets experienced strong growth in 2020, up 13% compared to a year earlier according to Wine Owners which pulls together the Fine Wine Icons Index. Unlike the global financial crisis, the wine market has held its nerve throughout the pandemic, merchants did not mark down prices and the market has been stable.

After a sluggish 2019 where the value of the HAGI Top Index – which Knight Frank uses to track the value of classic cars – fell by 7%, 2020 saw cars race back up to third place in KFLII with growth of 6%. Ferraris performed particularly strongly.

Unlike fine wine, the Knight Frank Whisky Index, compiled by Rare Whisky 101, lost some momentum in 2020, dropping by 3.5%. Against many other investments that doesn’t seem too much of a decline but when compared to 2018, when the value of whisky rose by circa 40%, making it the best performing luxury asset class in the KFLII – it points to the volatility of ultra-rare-top-end whisky as an investment. 

The art market also didn’t fare quite so well with the auction tracking AMR All-Art Index dropping 11% in 2020. But with so many factors impacting the market, there was no single reason for the fall in average values.

“For obvious reasons one of the biggest changes was a shift towards private sales at the major auction houses last year,” says Sebastian Duthy of AMR. “The volume of all sales that were publicly auctioned at Sotheby’s and Christie’s were down 26% and 46% on 2019, respectively. The problem was compounded by the slowing the supply of quality works as consigners who could afford to wait, preferred to sit it out at home. Having said that, there was still plenty of enthusiasm from buyers. With a new emphasis on home working, there was a surge in demand from collectors sprucing up their homes.”

The coloured diamond market was also somewhat stymied by the pandemic, prices remained flat as a consequence but this year could see a bounce.

Over the past 10 years, the best luxury performer in the KFLII was rare whiskey, with prices up a whopping 478%, followed by cars (193%) and wine (127%).

Meanwhile, the KFLII, which is the weighted average of the change in value of each asset class over a given period, grew by 3% in 2020 and 129% over the past 10 years.

Knight Frank’s Head of Residential Research, Australia Michelle Ciesielski said when looking at the performance of the KFLII against prime property, in the past year Perth prime property outperformed (4%), while Brisbane and Gold Coast prime property was on par (3%).

“The market for luxury collectables, which largely relies on the auction market, has been detrimentally impacted by COVID-19,” she said.

“Some luxury investments are performing better than others, particularly the higher-value investments. Handbags, for instance, have performed far better than the top end of the art market where no painting sold for over US$100 million in 2020 for the first time in a number of years.”

Knight Frank’s Joint National Head of Private Office Sarah Harding said, “Knight Frank’s Attitudes Survey found that when it comes to investments of passion, Australian ultra-high-net-worth individuals are most likely to collect art, classic cars and wine.

“Thirty-three per cent of Australia’s ultra wealthy have increased their spending on tangible investments of passion, such as art and classic cars during the pandemic.

“Many of our ultra-wealthy clients have told us they have rotated their artwork more than they would in a calendar year due to increased entertaining, business and generally more time spent in their main residence and second homes in 2020, hence the desire for a greater range.

“Once lockdown restrictions eased, although still confined within the state, many found themselves travelling by car to their coastal hideaway or country estate.

“Travelling in the latest edition of their car of choice went some way to make up for not holidaying in their Tuscan home, or skiing the slopes of Aspen, as they would have been prior to the pandemic.”

For more information, contact:

Michelle Ciesielski
Head of Residential Research, Australia
Michelle.Ciesielski@au.knightfrank.com 
+61 414 694 220