It's plain sailing as investors indulge their passion for luxury
Published 24/06/2010 | 05:00
THOSE rich who were not wiped out by the crash of 2008 switched their money to buying art, jewellery and luxury goods in the absence of investment opportunities, a new survey has found.
Demand for such "luxury collectables" fell after the crash but picked up as early as the second half of last year, the report from investment bank Merrill Lynch showed.
Some high net-worth individuals (HNWIs) said they looked for items which might have tangible long-term value, making these "passion investments".
"The two categories that were most attractive to these 'investor-collectors' were art and other collectables such as coins, antiques and wines.
"The demand for passion investments overall is likely to increase in 2010 as wealth levels rebound, evidenced by the fact that auction houses, luxury goods makers and high-end service providers all reported signs of renewed demand toward the end of 2009, and in the early part of 2010," the report stated.
Luxury collectibles such as cars, yachts and jets accounted for almost a third of HNWIs' passion investments in 2009.
While global yacht sales tumbled 45pc in 2009, sales in the US reported a near 30pc increase in the first quarter of this year compared with last year.
Among rich, investor-collectors' art was the most likely investment to be acquired for its potential to gain value.
UK and US art auction sales were down $1.9bn (€1.5bn) and $1.6bn respectively in 2009, but 2010 sales showed a robust rebound. China's art markets thrived, with auction revenues rising 25pc to $380m.
As in previous years, the proportion of passion investments allocated to art was highest in Europe and Latin America at 27pc.
The jewellery, gems and watches category was the second-largest allocation of passion investments, with the heaviest purchases from the Middle East and Asia (excluding Japan).
HNWIs like to keep in shape, with health and fitness activities such as luxury spa visits, fitness-equipment installations and preventative medicine procedures the top lifestyle spending category.
Luxury travellers also returned to the market, as 45pc of HNWI clients increased spending on luxury or "experience" travel.
Spending on luxury consumables such as designer handbags and shoes was on the rise in the second half of 2009 in countries such as China and Brazil, but remained subdued in North America, Merrill wrote.