One investment that’s giving South Africa’s super rich a huge return

·4 May 2017

In the past, classic cars were seen as the ‘playthings’ of millionaires – with the desire to collect driven by emotion, nostalgia and fancy – but today, these icons are seen as an incredibly lucrative investment opportunity, according to Sanlam Private Wealth.

Notably, investors are increasingly driven by rarity and the future value profile of classic cars, where these throwback beauties can sell at auction for as much as $30 million.

Leon Strümpher, Portfolio Manager at Sanlam Private Wealth says the market for classic cars has experienced a consistent rise in value over the past two decades – with the value of the classic car market in the UK alone said to be about £5.5 billion (R95 billion).

According to the Knight Frank Luxury Investment Index the value of the classic car market internationally has over the past 10 years appreciated more than that of watches, wine, jewellery, stamps and art, he said.

Among the most popular classic car brands, the latest price index compiled by the Historic Automobile Group International shows that Mercedes-Benz has been the best performing marque, increasing in value by just over 85% over the past three years.

Ferrari also did well, posting an increase of 65% and sending Porsche into third place with a rise of almost 60%.

A 1960s Ferrari Dino that might have sold for R25,000 in the 1980s, may sell for as much as R6 million today – while an E-type Jaguar worth R50,000 in the early 1990s might fetch upwards of R2 million in 2017.

The best-performing classic cars in terms of return on investment have been the Ferraris from the 1950s and ‘60s, Sanlam noted, with the highest price paid for a Ferrari believed to be more than $50 million for a 1960’s Ferrari 250 GTO.

Not all classics are good investments

According to Strümpher, not all classic cars are a sound investment, however.

“It takes a really deep knowledge of this industry and a lot of homework to know which ones will appreciate in value. Investment cars vary dramatically in price tag and returns, depending on their rarity and condition, and the size of the buyer’s pocket,” he said.

Classic car experts have outlined some tips on what types of classic cars will deliver the best return on investment:

Younger classics – 1970s, 1980s and early 1990s models with V8 engines and preferably manual transmissions.
Mercedes models from the 1970s are becoming sought after, with prices rising steadily.
Go for brands that have continued with their ranges through the years, such as the Porsche 911 range. There have been various iterations of the 911 models, and the 1970 and 80s versions are now being hunted down.
Other desirable brands include the sports version of the BMW 6 series, Maserati, Mazda MX5, and Toyota sports cars.

The key driver behind the popularity (and thus high prices offered) for classic cars is scarcity, Sanlam said. Because of this, South African classics are becoming a popular option for global collectors, as the country offers a decent price point.

According to a wealth report from New World Wealth in 2016, these are the most popular classic cars among South Africa’s high net-worth individuals, listed by price.

Morgan Roadster (1960s) – $100,000