There is a lot of interest in wine investment at the moment. With banks offering low interest rates on savings and uncertainty in the world markets, people are looking to find alternative places to put their money. Wine has preformed especially well in recent years and even with experiencing a correction in late 2008, it has shown good growth since then, with many wines higher now than before. Much of this has been driven by new wine-consuming markets, with China leading the charge. Demand has increased but the supply has remained constant.
The Liv-ex 100 Fine Wine Index is the industry’s leading benchmark. It represents the price movement of 100 of the most sought-after fine wines for which there is a strong secondary market and is calculated monthly. The majority of the index consists of Bordeaux wines – a reflection of the overall market – although wines from Burgundy, the Rhone, Champagne and Italy are also included. The index is calculated using Liv-ex Mid Prices and is then weighted to account for original production levels and increasing scarcity as the wine ages. As such, the index is designed to give each wine a weighting that corresponds with its impact on the overall market. The value of the index as of 31st May 2010 was 293.55, a rise of 4.4% on the previous month. The index is up 37.15% year-on-year and 23.8% year-to-date.
(taken from www.liv-ex.com).
Wine investments are exposed to risk like any other investment, with the value potentially going up or down, but the single greatest attraction for wine investment is the fact that Fine Wine profits are exempt from Capital Gain Tax – up to a point. If you are fortunate enough to have a rather large cellar and the value of it exceeds £250,000 you will have to pay Capital Gain Tax. However, it would be my recommendation that attention is paid to the law on this as the parameters may change.
However, caution must be exercised when purchasing wine for investment purposes. Only a tiny proportion of the wines available have the longevity to show growth and have a strong resale market. Usually the wines must be in case quantity and remain in their original case. Provenance is key; wines that have been stored anywhere but a recognised storage facility, usually a wine merchant’s cellars, is ultimately going to be less attractive to the purchaser and therefore command a lower price. Also, any fine wine should be stored under bond – paying your vat and duty only restricts the resale possibilities. Vigilance must be applied as the wine industry is not exempt from fraud and unscrupulous merchants. Recently we were singled out as one of Jancis Robinson’s recommended merchants for the purchase of wine futures, the best way to obtain value in fine wine.