Watches and wines take the spotlight in luxury collectable market

WATCHES and wine led the Knight Frank Luxury Investment Index (KFLII) results for the fourth quarter of 2021 to its strongest annual performance since 2018.

With average growth of 16 per cent, the two asset classes reflected a generally strong year for luxury investments that saw KFLII, which tracks the value of 10 luxury collectables, rise by 9 per cent.

"Independent watchmakers stole the headlines in 2021, with new records set for watches by George Daniels, Roger Smith, Christian Klings and Philippe Dufour," says Sebastian Duthy of AMR, which compiles our watch data. Rolex Daytonas, however, showed the strongest growth overall.

"There has been a new wave of investment money coming into the wine market, some of it led by macro factors, such as inflation worries - with wine being seen as a hedge - but also more localised factors such as supply shortages due to weather conditions, particularly frost, and supply chain issues," explains Miles Davis of our data supplier Wine Owners.

Other high performers in the index included art (+13 per cent), rare whisky (+9 per cent) and coins (+9 per cent).

Knight Frank's Andrew Shirley, who compiles KFLII, said: "The Covid-19 pandemic certainly hasn't dented the enthusiasm of collectors who have continued to pay significant amounts of money for an increasingly eclectic mix of assets including basketball sneakers, comics and even meteorites."

The art market, for example, has seen a strong resurgence, said Veronika Lukasova of AMR. "Sotheby's posted record sales of US$7.3 billion in 2021, while Christie's recorded a five year high of US$7.1 billion."

Arguably the biggest trend in the luxury collectables market this year has been the surge in non-fungible token (NFT) sales.

The world's main auction houses sold an estimated US$235 million of crypto art in the form of NFTs last year, but in total over US$25 billion of NFT artworks were sold via online platforms. This trend looks set to continue.

Art

Veronika Lukasova, AMR

Sotheby's posted record sales of US$7.3 billion in 2021, while Christie's recorded a 5-year high of US$7.1 billion. According to our All Art Index, average sales were up

13 per cent since 2020, with much of the new ground made up by a handful of big-ticket works. Many of the top lots could be found in the US$676 million sale of Harry and Linda Macklowe's fabulous art collection at Sotheby's, sparked by the couple's divorce. Several blue-chip artist records were set, including Jackson Pollock's Number 17, which achieved US$61.2 million, and Cy Twombly's Untitled, which went for US$58.9 million.

Who was buying?

The sale of NFTs linked to digital artworks encouraged a fresh wave of buyers through the portals of the major auction houses last year. According to Christie's, 75 per cent of those investing in the category were new collectors, with an average age of 42. The highest profile were from Asia, with Singapore-based founder of NFT investment fund Metapurse Vignesh Sundaresan, known as MetaKovan, paying US$69 million for Everydays: The First 5000 Days, an NFT by the artist Beeple in March.

In November, underbidder Justin Sun paid US$78 million for Alberto Giacometti's Le Nez from the Macklowe sale, describing the acquisition as part of his drive to promote the fusion of finance, culture and art within the crypto community.

What sales really stood out?

The art world delighted in the sale of Frida Kahlo's Diego and I. Completed in 1949, the self-portrait also depicts Kahlo's adulterous husband - Mexican national hero, Diego Rivera. Last appearing at auction 30 years ago, the painting sold for US$34.9 million, making it the most valuable work of Latin American art ever auctioned. The figure also catapults the value of Kahlo's work above Rivera's for the first time.

What trends will we see in 2022?

Last year, we predicted the rise in value of the red-chip market - ultra-contemporary artists using social media to build their reputations - and we expect this to carry on. Phillips will continue its successful partnership with Beijing Poly, Asia's biggest auctioneer, while Sotheby's expansion of its online platforms seeks to increase Asian participation worldwide. Over the next two years, Christie's plans to open new salerooms in Hong Kong and Shanghai to accommodate demand. With Asian collectors also chasing NFTs, 2022 will see the continued rise of collectables competing with sales of art.

Scotch whisky

Andy Simpson, Rare Whisky 101

We've continued to see higher-value bottles - those over £5,000 (S$8,938) - underperform the broader market, although there are now signs of recovery in this sector of the market. The broader market has exceeded both 2019 and 2020 from both a volume/value perspective and also investment growth, so while 2021 has had many ups and downs, bottles of Scotch whisky have remained resilient.

Who was buying?

We're seeing a good blend of demographics buying whisky as an investment. However, anecdotally, the average age of the typical whisky collector looks to be getting lower.

What sales really stood out?

From a value and rarity perspective, the standout auction of the year was the Distillers' One of One auction held by the Worshipful Company of Distillers in early December for charity. Of the unique lots on offer the most expensive was Glenfiddich's The 1950s Collection - 4 bottles of rare spirit, all distilled in the 1950s - which sold for just over £1 million.

What trends will we see in 2022?

Throughout 2021 we saw a number of brand owners start to experiment with NFTs as a way of reaching a broader base of customers. We expect this to become more of a trend in 2022 and beyond. Following some recent declines in investment values for The Macallan, we're expecting this to be reversed through 2022 for older, discontinued bottles rather than the more voluminous "limited" releases of late.

Classic cars

Dietrich Hatlapa, HAGI

Our main index, the HAGI Top, rose by 3 per cent in 2021, well below the long-term annual average. That said, some sectors performed better: the HAGI LPS Index for classic Lamborghinis managed almost

15 per cent for the year followed by Porsche with 8 per cent (HAGI P) and Ferrari on 6 per cent (HAGI F).

Who was buying?

Knowledgeable enthusiasts who felt more comfortable in their asset allocation towards collectors' cars post-Covid. Having made money on the stock market or in tech, wealthy players from across the globe (but mostly the US and Europe) are now also somewhat concerned about rising inflation going forward. Hence the focus on collectables.

What sales really stood out?

The 1995 McLaren F1 3-seater sports car, chassis 029, made almost US$20.5 million in Gooding & Company's Monterey auction. The car had covered just 390 km from new. The Monterey auctions in August were outstanding overall.

What trends will we see in 2022?

I personally think early supercars or motorsport homologation road versions such as the Mercedes-Benz 190 Evo II, Lamborghini Countach, Bugatti EB 110, Porsche 959, Ferrari 288 GTO and BMW E30 M3 will do well. We are noticing a younger generation of emerging collectors gaining importance in the market. But examples need to be in perfect condition with the lowest mileage.

Coloured diamonds

Miri Chen, Fancy Color Research Foundation

The market saw an overall increase in 2021 in all categories of natural fancy colour diamonds. Due to a significant shortage of pink diamonds between 1 and 3 carats, prices have risen, especially in the Intense category. We have also seen prices of yellow diamonds in various categories increase, mainly in the 5-10 carat range. Among smaller diamonds, 1-carat Fancy Vivid Yellows stood out.

Who was buying?

The typical buyer prior to Covid-19 was the Chinese client who purchased fancy colour diamonds globally. This has changed due to travel restrictions from China and an increase in available money in the West. We are now seeing buyers from the US and European Union (EU) driving the strongest demand for fancy colour diamonds.

What sales really stood out?

Typically, the fancy colour diamonds sold at auction are those that can't be sold in the markets since their quality is not good enough. Therefore, the prices of these diamonds do not reflect real market prices. However, at recent auctions, we have seen an increase in the price of yellow diamonds. For example, at the most recent Sotheby's Magnificent Jewels Auction held on 7th December in New York, a 12.24-carat Fancy Intense Yellow Radiant VS1 diamond, which had a high auction estimate of US$20,424 per carat, sold for US$32,941 per carat.

What trends will we see in 2022?

A new trend likely to continue is the use of blockchain to track diamonds as they are bought and sold. For example, when a diamond trader puts a diamond on the blockchain, it signs the transaction with its private key. The signature can be verified by anyone using the matching public key. This means that the trader cannot later deny that it was the source of the diamond.

Wine

Miles Davis, Wine Owners

The broader market performed well in 2021, rising around 1 per cent per month on average. Champagne (+31 per cent) and Burgundy (+25 per cent) performed particularly well. Champagne from the amazing 2008 vintage stood out thanks to huge consumer and investment demand and some supply chain concerns. Bordeaux (+10 per cent) lagged slightly.

Who was buying?

Asia particularly for trophy Burgundy names and the UK and US for Champagne. There has been a new wave of investment money coming into the wine market, some of it led by macro factors, such as inflation worries - with wine being seen as a hedge - but also more localised factors such as supply shortages due to weather conditions, particularly frost, and supply chain issues.

What sales really stood out?

There have been all sorts of new records set, particularly for rare Burgundy. On the flip side, there have also been issues at the auction houses with fake trophy wines, particularly in the US.

What trends will we see in 2022?

Inflation and supply chain concerns will continue to fuel demand. People are drinking more expensive wine at home due to Covid restrictions. Australia's Penfolds is the first (and so far only, I think) producer to make an NFT announcement; no doubt more will come.

Watches

Sebastian Duthy, AMR

For big auction houses such as Christie's, Sotheby's and Phillips, luxury categories such as watches were once seen as a gateway to their main business of selling art. Last year proved that this was no longer the case as total sales of watches topped £420 million at auction worldwide. The figure - an increase of 54 per cent on the previous year - also proves that public sales are back with a vengeance since the lifting of many pandemic restrictions.

Who was buying?

Sales of watches in Hong Kong continue to outpace rivals Geneva and New York, but only just. The Asian market was buoyed by an earlier lifting of restrictions, but also by a younger generation of Asian collectors seeking trophy pieces.

What sales really stood out?

Phillips, the premier auction house for watches, nearly doubled the previous total for their autumnal Geneva sale. With an auction total of 24 million Swiss francs (S$34.9 million), the November sale was packed with 400 enthusiasts and a further 2,300 online.

Among the 12 lots to break the 1 million Swiss franc mark was a 64-year-old Omega Speedmaster, nicknamed the Tropical Broad Arrow. One of the original timepieces designed to compete in the emerging market for "tool" watches, this rare example eclipsed all previous records at just over 3 million Swiss francs.

What trends will we see in 2022?

Independent watchmakers stole the headlines in 2021, with new records set for watches by George Daniels, Roger Smith, Christian Klings and Philippe Dufour. AMR's index of Rolex sports watches showed the steepest climb, however, as appetite for the finest examples remains insatiable. According to our new Rolex watch report, Rolex Daytonas continue to increase in value the most overall, closely followed by Explorers and Submariners.

• This article first appeared in Knight Frank's The Wealth Report 2022