According to the Knight Frank Luxury Investment Index, the overall value of luxury collectibles including art, watches, jewelry, coins, wine, classic cars, colored diamonds, handbags, furniture and rare whiskeys grew by 7% in the 12 months leading up to the end of June 2022. This is the lowest annual return for luxury collectibles since 2021. The economic uncertainty and rising interest rates will have an unfavorable impact on returns from luxury collectible investment over a longer period. For new collectors, it is important to focus on pieces that bring them joy, as strong capital appreciation is hard to guarantee nowadays.
Luxury investment overall return decreased to 7%, the lowest since 2021
The Knight Frank Luxury Investment Index tracks the value of 10 categories of luxury collectibles including art, watches, jewelry, coins, wine, classic cars, colored diamonds, handbags, furniture and rare whiskeys. The 7% growth over the past year is still higher than returns for other assets like prime central London property, FTSE 100 stocks and gold. However, it is the worst performance for luxury collectibles since the second quarter of 2021. For new collectors looking to invest in luxury items, happiness from ownership should be the priority as the investment outlook is uncertain.
Artwork investment return peaks at 30%, leading luxury investment
According to the index, artwas the best performing collectible asset in the 12 months leading up to June 2022, with a price increase of 30%. Watches and jewelry took second and third place, with returns of 10% each. Rare whiskey was the only declining category, down 4% year-on-year. But high-end collectible whiskeys have seen a 322% surge in the past decade. So whiskey remains an attractive long-term investment within the luxury assets universe.
Luxury collectibles account for 5% of ultra high net worth individual’s assets
The report from Knight Frank shows that collectibles account for around 5% of the total wealth portfolio of ultra high net worth individuals globally. This is higher than the average allocation to gold and cryptocurrencies. The diversity and heterogeneity of collectibles allow them to be an alternative investment to augment more traditional holdings in property and equities. With significant economic uncertainty nowadays, collectibles can still fulfill the goal of value preservation and appreciation in smart wealth management.
58% of ultra high net worth individuals maintain collectibles allocation
According to survey results, around 58% of ultra high net worth individuals plan to keep their allocation to collectibles at the current percentage of total assets. Only 12% intend to decrease their holdings. This indicates confidence towards collectibles among the wealthy despite slower return outlook. For art and other passion assets, steady buying sentiment promises continued market growth potential.
The Knight Frank Luxury Investment Index shows that returns for collectibles including art moderated to 7% annual growth, the lowest level since 2021. But luxury items still outperformed stocks and gold over the past year. Economic uncertainty means slower capital appreciation outlook, so new collectors should focus on art and objects that speak to their personal passions.