2020 was a year of bumper returns for handbags and watches.
Javed Fiyaz has about 50 watches, including timepieces formerly owned by the Sultan of Brunei and Prince Charles. “I collect some for passion and sometimes for investment,” he says.
It’s the passion part that is paying off. A diamond studded Richard Mille RM 15 he bought for £300,000 ($417,818) in 2012 has now doubled in value. A Patek Philippe Grand Complications Sky Moon is already worth more than the HK$18.9 million ($2.4 million) Fiyaz paid for it in 2019.
Overall, the price of collectible watches has risen by 89% over the past decade, according to new research from the Knight Frank Wealth Report. It is part of a broader desire to buy second hand luxury which has captivated the super-rich during a year that curtailed their usual spending.
Pre-pandemic, if you wanted something that would both increase in value and look nice you went for art. But Covid-19 has turned the rules of luxury investing on their head. For the first time in five years, the value of investable art turned negative, forcing the wealthy to look for luxury investments in more unusual places.
Javed Fiyaz (left) with Jay Rutland, John Caudwell and James Stunt at The F1 Party in 2014.
The most profitable luxury investment of 2020 was the humble handbag. According to Knight Frank, the price of collectible handbags rose by 17% in 2020. The price was driven up by the not-so-humble sale of a Hermes Himalaya Niloticus Crocodile Retourne Kelly 25 handbag for $437,330 in November, a new record.
Rather than being a means for the not-so-rich to show status, second hand fashion has now become a lucrative investment, outperforming most stock markets. Nowhere was this more evident than in the sale of a “game-worn” pair of Michael Jordan’s trainers for $560,000 in May.
“Customers have gotten savvy and are thinking about luxury purchases as an investment,” says Tracy DiNunzio, CEO of luxury marketplace Tradesy.
A Yamazaki 55 single malt whiskey sold for HK$6.2 million ($800,000) in August 2021
Unsurprisingly, 2020 was also a good year for booze as well. The value of fine wines jumped by 13% during a year which sales of all alcohol types rocketed.
But even within the drinks trade niche areas have outperformed the mainstream. Wine and spirits merchants Justerini & Brooks reported their biggest month ever for rare scotch whiskey sales in May. Although the price of rare whiskey fell this year, over a 10-year period the category eclipses all other luxuries, and most other investments (with the exception of Bitcoin) having risen by 478%, according to Knight Frank.
Just as Bitcoin has driven investment into other cryptocurrencies, savvy investors are now looking at other spirits, such as tequila, brandy or cognac, which might ride whiskey’s wave.
Will these niche luxury investments continue to do well in 2021? Many expect normality to resume as soon as real-life auctions return.
“No works of art broke the $100 million barrier in 2020,” says Knight Frank. There are few right-minded billionaires who will spend that sort of money without inspecting something first.
As a result, major auction houses have postponed their largest sales until in-room bidding can resume. Artworks, such as Francis Bacon’s “Triptych” series which sold for $84.5 million in December, set a record during a year where few grand masters or impressionists were put up for sale.
Francis Bacon’s painting “Triptych” series sold for $84.5 million, the most expensive artwork sold … [+]
But others point to deeper, psychological reasons that have fundamentally changed the way the super-rich spend. “Nostalgia causes wellbeing,” says a recent paper by Talor A. FioRito and Clay Routledge published in Frontiers. The study into nostalgia shows that “negative affective states such as sadness, loneliness, and meaninglessness trigger nostalgia and nostalgia, in turn, enhances well-being, feelings of social connectedness, and perceptions of meaning in life.”
If nostalgia helps combat sadness and loneliness then it has never been more important than now, and luxury purchases can play a part. “Given the impact that Covid-19 has had on the way we live, work and shop, it is unsurprising that imposed isolation during the pandemic has fuelled nostalgia-driven luxury purchases,” says Effie Datson, global head of Family Office at Barclays Private Bank.
I write about the fortunes of Europe’s wealth amidst the continent’s political ups and downs. I cover billionaires and where their money ends up: The charities and