The Luxury Index
Analysing Luxury Brand Investments
Property as an investment product is generally perceived to be the safest high return option amongst other traditional products, such as stocks and shares, which are seen as more volatile. However, property is also viewed as a luxury to many, and in the luxury stakes, many other products can make good investments, albeit on a smaller scale.
We’re talking products that might be considered more as extravagant purchases, or collectors’ items, rather than investments. Items that, like property, are tangible, and providing you take care of them, can see their value increase.
The exciting part of this? Many of you will already own a product like this, without realising its potential.
Here at SevenCapital we’ve done some research into those luxury items and how much they’ve grown in value over the last 10 years. We’ve also calculated how much they could appreciate over the next 10 years based on historical growth rates.
Introducing ‘The Luxury Index’.
Looking at classic cars, fine wine, classic designer collectibles and top gadgets, items in The Luxury Index are compared by appreciation rate, alongside property, to find out which is likely to make a good investment. As with all investment past performance is no guide to the future but information is key.
1. LD Cristal Champagne
Topping the chart as the product that is likely to appreciate fastest is a bottle of the popular LD Cristal Champagne. Its price of just £81 in 2008 has skyrocketed by 214% in 10 years to its current value of £255. Based on this we calculate it could increase to £1,478 per bottle in 2028. That’s a huge total increase (since 2008) of 1725%.
Coming in second is the classic Birkin bag. Surprisingly, designer handbags are becoming a popular investment item, due to their potential to gain in value, provided they are kept in pristine condition. Since 2008 the value of a Hermes Birkin handbag has increased by around 153% and, if our speculation is correct, it could appreciate by a total of 814.26% by 2028, to £39,313.
Popular gadgets such as iPhones, which are renowned for rising in price every year, showed no sign of slowing down, which is unsurprising. With an expected 515% rise in cost over the 20-year period, it’s easy to see why Apple has just been announced as the first ever trillion-dollar company. Sadly, this does not necessarily make an iPhone an investment gadget. The difference between this and a classic Birkin, for example, is that it’s unlikely that an iPhone you buy in 2018 will appreciate in value, rather just the cost of new products going forwards.
4. Rolex Submariner
The ultimate classic luxury watch brand, Rolex, continues to appreciate in value at a rate to rival its ever-growing desirability. Since 2008 a Rolex Submariner has nearly doubled in value, which means that by 2028 its value could increase to £32,387 – a whopping 488.85%.
5. Detached House (UK)
Detached houses unsurprisingly topped the residential property charts in our Luxury Index. Between 2008 and 2018, house prices rose on average by more than 29%, from £354,036 to £458,611. By 2028 if the upward spiral continues, this could more than double, to more than £1million. In total, a 185.15% increase on 2008 prices.
Shortly behind detached houses, apartments are becoming increasingly popular, bolstered by the growing population of renters and popularity of city centre living. And whilst demand continues to outstrip supply, both sale and rental prices continue to appreciate. With an average value of £245,668 in 2008, the price of apartments could more than double to around £506,000 by 2028.
7. Seychelles Holiday
More of an investment in wellbeing, unless you happen to be the owner of a holiday home in the Seychelles. It’s interesting to see how the cost of a luxury holiday will compare over the next 10 years. Currently valued at £2,971, thankfully this is likely only to increase in cost by a margin.
While most cars depreciate fairly quickly within just the first year of being used, the Bentley is one of only a handful that bucks this trend to become recognised as a classic car. Despite it being expected to appreciate in value by the lowest percentage across our 20-year time period (42%) the actual amount of appreciation is considerably more significant than a holiday or a designer bag.
So what does this mean in investment terms?
It’s interesting but not surprising to see from the results that lower priced investments tend to have the ability to appreciate in value quicker than higher priced items. However, it’s also clear that looking at rate of appreciation alone isn’t the best way to weigh up whether one investment will be better than the other.
For example, whilst the owner of a Birkin may find the cost of their initial purchase versus their return significantly higher in percentage than the person who purchases a city centre apartment, in real terms, the person who bought the apartment is likely to see significantly higher returns despite a higher initial spend and “slower” appreciation.
This is true for the property market in general, and in part explains why property is often viewed as a more stable investment type. Whilst initial cost is high and price growth is steadier, the returns can be far superior to many of its competitors.
As with any investment, it pays to do your homework first. Click here to view our current available investment opportunities.