From Cars To Wine: Luxury Investments That Rose In 2022 Despite Recession Fears & Rising Inflation

The fear of a potential global recession has made startup investors cut down on their investment avenues. After a couple of consecutive years of the surge, the investments saw a funding winter with declining private equity and venture capital funds by nearly a third to US$ 54.2 billion in 2022.

Due to the deteriorating economic outlook, falling stock prices in the technology sector, and mounting recessionary fears, venture capital investors are putting the brakes on their previously aggressive backing of businesses. According to a recent Crunchbase study, investments in North American startups declined 63% in the fourth quarter of 2022 compared to the same period the previous year.

Overall, the investors are holding back. But, this is not the case with luxury goods because these goods are a tempting alternative to stock market investment as their values don't fluctuate like stocks, and they can offer good profits when sold in future. Luxury is primarily defined by rarity, quality, and cost. It may pertain to a variety of industries, including the hospitality sector, cosmetics, high fashion, travel, or leather products.

The 17th Edition of the Knight Frank Luxury Investment Index (KFLII), a part of their 'Wealth Report 2023,' shows the rise in the value of 10 passion investments. It showed that investment in passions is riding high, with an increase of 16% in 2022 despite the economic worries and rising inflation.

Half of the assets in the index, weighted to reflect the "collectability" of each component, grew by double digits last year. These 10 passion investments have outperformed mainstream investment avenues like equities and gold.

Let us have a look at some of the luxury goods and the rise or decline in their investments:

Investments In Luxury Goods

KFLII

Art

At the top, art investments rose by 29%. Very affluent collectors' exorbitant rates for museum-quality pieces of art were a major factor in that performance.

"Several single-owner collections, including works owned by Microsoft founder Paul Allen and American investor Anne Bass, produced over US$2.5 billion, more than doubling collection sales in 2021. With the provenance of a high-profile collector attached, blue-chip works routinely break auction records, and last year was no exception with five achieving over US$100 million," the report mentioned.

Classic Cars

With the strongest finish for nine years, this investment rose 25%. Contributing to this, a Mercedes-Benz Uhlenhaut Coup¨¦ valued at US$143 million was the most expensive vehicle ever sold, comfortably setting a new milestone.

The report further highlighted that high-end collectors have returned to the market after many sales were delayed due to the COVID-19 pandemic, which has aided this passion for growing further.

Watches

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In 2022, watches rose 18% to take the third position on the KFLII podium. The top three auction houses' watch sales increased by 33% to ?475 million in 2022. This includes 40 timepieces that were sold for more than ?1 million, which is an increase of 12 over the prior year.

"If you look at any auction catalogue, you'll notice that sales over the past five years have been dominated by only three designs: the Patek Philippe Nautilus, the Audemars Piguet Royal Oak, and the Rolex Daytona. Despite the fact that these watches have significantly increased secondary market sales, the brands are having increasing trouble keeping up with demand," says Sebastian Duthy of Art Market Research in the KFLII report.

Whiskey

Even while whiskey has remained the KFLII's 10-year leader by a significant margin of +373%, it was one of 2022's worst performers, growing by just 3%.

According to Andy Simpson of the KFLII, the market for bottles costing more than ?5,000 has unquestionably declined.

Also Read: Pakistan Imported 2,200 Luxury Cars Amid Economic Crisis

Wine

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The index grew by 10% as compared to the 16% rise in 2021. It also showcased a 10-year growth of 162%. But, this passion investment fell in 2022 partly because of the hike in demand for other indexes.

Moreover, NFTs or non-fungible tokens like CryptoPunk and Bored Ape Yacht Club series sold for millions of dollars in 2021, popularising NFTs in the art industry. The fall of crypto enthusiasts like Sam Bankman-Fried and the drop in Bitcoin and other cryptocurrencies endangered the budding sector by 2022. However, CryptoSlam said that Bored Apes sold for about US$1.6 billion last year.

eBay's move

eBay launched a Luxury Exchange in New York, allowing customers to trade in jewellery, handbags, and watches from high-end brands that are covered by its Authenticity Guarantee.

Clients can have their pricey possessions appraised and given a value with which they can shop the store's contents and exchange anything for it in their own currency.

All in all, with the evolution of the luxury resale market and the rising prices and constrained budgets, shoppers are reportedly displaying a preference for used and pre-owned goods. Here, 50% of luxury shoppers in the US think that some of their accessories may increase in value. Alongside the passions mentioned above, handbags grew by 15% in 2022. But coins, jewellery, furniture, and coloured diamonds had comparatively witnessed less demand from the investors of luxury goods.

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