Comparing Luxury Investment Around the World

Investment in luxury assets can help high net worth (HNW) and ultra-high net worth (UHNWI) individuals implement smart financial growth. But what luxury goods are people spending on these days?

Is every HNI and UNHNI investing in the same item?

Or does geography and culture play a role in their investment decision?

Are there goods that everyone seems to be spending on?

Let’s answer these questions without further delay!

Where have most luxury investments been coming from? 

HNIs and UHNIs from Asia and the Americas are the ones who are leading the pack in terms of luxury investments. HNIs and UHNIs from these regions are also more experimental and open to diversifying their investments. In comparison, European investors and Scandinavian investors are spending lesser on luxury items purely because these items cost significantly lesser in these regions.

Take a Rolex GMT-Master II, for instance. If you were to invest in this luxury watch in the Americas, you could be paying up to £9,833 for it. Conversely, in many places in Europe and Scandinavia, the same watch could cost as little as £5,950.

Now, this particular product doesn’t even represent the upper end of luxury investments. However, price discrepancies amongst continents are certainly affecting investment in luxury assets as a whole. It is affecting which population is investing actively in luxury investments, what products they’re investing in and by how much.

Drawing a comparison between luxury investments in Asia and the Americas 

When it comes to what luxury investments rule the roost in these two geographies, here are the goods that make up the top 10 in each region:

Asia 

  • Watches
  • Art
  • Jewelry
  • Wine
  • Vintage cars
  • Rare whiskey
  • Handbags
  • Furniture
  • Colored diamonds
  • Coins

Americas 

  • Art
  • Vintage cars
  • Wine
  • Watches
  • Jewelry
  • Rare whiskey
  • Furniture
  • Handbags
  • Coins
  • Colored diamonds

As can be seen, the demand for specific luxury goods in each continent speaks strongly to the cultural landscape of each region. Asia, being a highly technology-centric continent, has a greater number of investors who are investing in the watch segment. In particular, investment in luxury watches is being driven upwards by China, where the coronavirus pandemic has not dampened demand. In fact, compared to investment figures in January 2020, by November 2020, there had been a 17% spike in investment in luxury watches in China.

In comparison, the North American love of automobiles – specifically their heritage in supercars and vintage cars – has grown investment in that segment. In March 2020, the 1932 Bugatti Type 55 Super Sport Roadster was sold to a buyer for a whopping $7.1 million. This was one of the biggest automotive luxury investments of the year.

The era of art as an investment  

In 2020, there was a huge spike in the number of HNIs and UHNIs from across the world, who increased their investments in art. Compared to many other assets, art is relatively a safer investment. Many of the purchased artworks are currently in the custodianship of some of the world’s leading museums. Being provided ample, world-class care, art as an investment is turning out to be smarter than other assets which need active maintenance by investors themselves.

The 1981 work by Francis Bacon, Triptych Inspired by the Oresteia of Aeschylus, sold for $84.6 million in June 2020. In March 2021, a digital art piece by artist Mike Winkelmann (aka Beeple), titled Everydays: The First 5000 Days, sold for a phenomenal $70 million in under just an hour of the auction. What made headlines was that not only was the piece purely digital, but the investment was purely in cryptocurrency.

What other luxury investments are worth investing in for the year 2021? 

Handbags made a really good investment in 2020 when a Hermès Himalaya Niloticus Crocodile Retourné Kelly 25 sold for $437,330 in November. Reports indicate that the luxury handbag segment shows a 108% 10-year growth rate. According to the Knight Frank Luxury Investment Index, Hermès handbags, in particular, are seeing a 17% jump in prices compared to the past 12 months.

Fine wines and whiskeys come in next. Fine wine prices spiked by 13% in 2020, despite the coronavirus pandemic. Aged and rare whiskeys too have a huge demand from HNIs and UHNIs globally. In 2019, the 60 years-old The Macallan 1926 sold for £1.5 million – the first of its kind. Reports show that the fine wine segment projects a 10-year growth of 127% and rare whiskeys a whopping 478% – the highest of any luxury asset segment today.

The classic/vintage car segment outperforms the fine wine category, with a forecasted 10-year growth of 193%. Between January & March 2021, numerous vintage cars have been sold to luxury investors. At the top of the list was the 1972 Matra MS 670, which sold for $6.9 million.

Following these assets in terms of investment profitability on a 10-year growth rate are:

  • Luxury watches – 89%
  • Coins – 72%
  • Jewelry – 67%
  • Colored diamonds – 39%
  • Furniture – 22%

As the world starts to get back on its feet after months-long global lockdowns, the investment potential for these luxury items looks to be very promising. As the year goes on, we will certainly see further investments in these luxury categories.

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