Once considered a lucrative activity, nowadays investing in a good bottle of wine could see a huge return on investment. To anyone that knows wine, French is the must-have and when it comes to investment, French Bordeaux is up there with rare coins and fancy cars.
But what makes French wine such a fruitful investment?
Fine wine investment has produced positive returns since records began. While stocks and bonds may dominate investment portfolios, statistics show that wine has outperformed government, cash and real estate investments for many years.
Data shows that fine wine has offered investors double-digit returns year-on-year, with the market growing around £3 billion annually. While the investment of fine wine is not new, price transparency and liquidity now mean that investors of all levels can profit from the ever-growing market. Higher equities and increasing rates of inflation and interest on the bond market mean investors are now seeking a unique source of return – and wine offers just that.
Unlike other assets, fine wine is not subject to income or inheritance tax, or capital gains. A status of ‘wasting asset’ means investors will never have to pay tax on profits made from sales. Similarly, wine is hardly ever affected by geopolitics and the current unstable global climate will rarely impact a wine portfolio.
Despite the freakish weather experienced by wine producers last year, wine prices are increasing, with upmarket Burgundies rising between 15-25%. With new interest from Asian investors, prices are thought to increase even further in the new few months.
Experts have highlighted the behaviour of new wine investors who have been purchasing wines with the intention of leaving them to age and ultimately increase in value. With this in mind, providing that the wine quality and reputation is there, wine can be a very prosperous venture. When it comes to investing in fine wine, the vintage and region are two of the most important factors determining the return performance. Historically, French Bordeaux wines are much more likely to retain value, especially in times of financial stress.
Looking at historical records, quality wine can increase as much as 10-15% a year. These figures indicate an opportune time for people to consider putting down wine to age. With an international market for French wine, the value of wine has increased as a result of demand in a larger market.
Ari Emmanuel, Head Analyst at Charles Winn, commented: “We are still seeing dents in supply from the frost that hit Bordeaux 2 years ago…Global shortages in supply thrown in with the new-found wealth in China will no doubt be a perfect concoction high yields.”
With much more awareness, people are now taking a bigger interest in their wine than ever before. If you’re thinking of investing, it’s important to research and taste the wines, before establishing a relationship with your chosen wine merchant.