Usually a topic overheard at exclusive events and dinner parties, luxury assets including art, wine and classic automobiles are proving increasingly popular in South Africa.
This is according to a report by consultation firm, New World Wealth (NWW), which states that collectables – especially art, wine and classic automobiles – accounted for 0.7% of the total assets of local high net-worth individuals (HNWIs) in 2013.
This, it said, amounts to US$1.3 billion (R14.11 billion) in HNWI assets.
The following table gives an indication of the performance of selected collectables during the period between 2007 and 2012.
NW Wealth estimates that South African HNWIs hold US$230 million worth of fine art in 2013.
“The South African fine art market has boomed over the past decade and a half. Leading artists include Irma Stern, Thomas Baines, JH Pierneef, Alexis Preller, Pieter Wenning, Gerard Sekoto, Maggie Laubser and Hugo Naude.
“The value of these artists has risen appreciably – an Irma Stern painting that sold for US$20,000 (R217,000) in 1995 fetched over US$2 million (R21.7 million) in 2011,” NWW said.
There are also a large number of younger emerging SA artists that have their own galleries and regularly fetch over US$10,000 (R108,500) per painting including Portchie and Dimitrov, it further noted.
The majority of major art galleries are located in Johannesburg and Cape Town and in second-home hotspots such as Stellenbosch, Knysna, Dullstroom and Plettenberg Bay.
NW Wealth estimates that the worldwide fine art industry was valued at more than US$60 billion (R651 billion) in 2013.
Globally, fine art prices declined by 7.5% between 2007 and 2012, a decline that would have been far greater had it not been for strong growth in the Chinese fine art market.
According to Artprice.com, the largest auction market in the world in 2012 was China with 41% of turnover, followed by the US with 27%, the UK with 18%, France with 4%, Germany with 2% and Switzerland with 1%.
Global fine art turnover in 2012 totaled US$7.2 billion (R78 billion), up 5.5% on the figure from 2011. Approximately US$5.2 billion (R56.4 billion) of this figure was generated by the “big two”: Sotheby’s and Christies.
The global fine wine market recorded tremendous growth between 2000 and 2010, with prices paid for certain vintages of Lafite Rothschild having increased more than tenfold.
“As a result of this boom, portfolio managers that specialize solely in fine wine investments have begun to crop up and offer unique wine-denominated investments. Heavy buying by the Chinese in the Hong Kong market was the main driver of this growth,” NWW said.
However, its performance over the past two years has been poor, which restricted index price growth for 2007 to 2012 period to 6.4%.
The advisory firm pointed out that the Western Cape is home to some of the most expensive wine property in the world, valued at more than US$80,000 (R868,000) per hectare.
These estates have become a popular investment for HNWIs, with many of the most well-known South African HNWIs having their own wine farms in the area.
These estates generally have Dutch-style houses and are an investment for many local and foreign HNWIs. The most exclusive of these estates are located in Stellenbosch, Constantia (Cape Town) and Franschoek.
Over the 2007 to 2012 period, classic car prices rose by 52%. Notably, the drop in prices in 2008 was smaller for classic cars than for art and fine wine which reflects the resilience of this type of investment.
The classic car market is South Africa is less developed than in many developed-world countries. However, auctions do take place in Johannesburg, Cape Town and Knysna on a regular basis.
Other popular collectables for HNWIs in South Africa include luxury watches, private jets, yachts, helicopters and private game reserves.
Private game reserves in particular have become a popular investment for HNWIs over the past decade. As a result of this boom, rare wild animals such as Buffalo, Roan Antelope, Sable Antelope and Rhino now sell for over US$20,000 (R217,000) per animal in 2013, the advisory firm said.