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There are risks in luxury asset class investment, which are illiquid assets and not easy to sell like a stock or a bond. Also, the markets of collectables fluctuate unpredictably, where distressed sellers may get a lower price or no bidder for the items, but still, the buyers are highly passionate about some exceptional collectables, which are fun, as well as passion luxury investment.
An asset like a car requires a lot of time and money towards storage and maintenance. The regular maintenance of an old vintage model is a must, and the service costs can be very high, more than $20,000 a visit; however, the value continues to increase, and it grew over 300 per cent in years from 2008 to 2015.
In the last quarter of the year, global stocks declined, and the gains reversed. There were tensions over the global growth slowdown and the US-China trade disagreement, but there are always buyers who love paintings and are ready to invest in the art market.
Last year was not very affirming for the diamond investment as the high-end gemstones remained consistent and gained just 0.4 per cent in the first three quarters of 2018. Gemstones offer diversification, but risks are ranging from regulatory restrictions to changes in the buyer’s taste.
Fine art and antiques provide the buyers with assets, which can be held in physical form. These are appealing, and the data by the Art Market Research’s Art 100 Index show those who invested in the sector at the beginning of the last year gained, on average, by 10.6 per cent by November.
An auction of the painting of a man in a pink jacket made by David Hockney at Christie created a new record by selling for $90.3 million. Art requires less expenditure towards storage and maintenance, and sometimes, the price of such items soar to startlingly high levels in the current digital open markets.
It faces several risks like opacity, higher transaction costs, a relatively small scale transaction, cyclical trading, volatility, lack of regulations, and liquidity, but wealthy investors are increasingly investing in the asset class to increase their capital. In the future, it is expected the sector may integrate blockchain to improve authenticity and provide secure transactions.
Art-secured lending in the US grew 13.3 per cent – in the range of $17 billion to $20 billion in 2018, and some wealthy buyers are ready to be the single bidder at Sotheby’s, Christie’s, and Phillips auctions, where art sales increased 25 per cent in the year.
On the other hand, the luxury car market declined slightly in 2018 as per HAGI Top Index, but in the past 10 years, cars have been the best performing in the luxury index with the gains of 289 per cent where coins gained 182 per cent, wine 147 per cent, and jewellery 125 per cent, in the same period, and the value of Chinese ceramics and vintage furniture declined in the phase.
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