Many Enness Private Office clients have a range of luxury assets in addition to their property portfolio, ranging from wine collections to fine art pieces. Whilst these are often enjoyable to have purely from a collectors’ perspective, savvy investors should also be aware that you can make your luxury assets work for you. Some can even be used to raise funds for property investment. We have relationships with a number of lenders who can consider luxury assets when financing property.
What luxury assets can I use to finance property?
Cars are a popular example. We work with a lender who will allow you to leverage luxury and classic cars to finance property. This lender will accept a number of classic car brands as security, including BMW, Mercedes, Bentley, Ferrari, Aston Martin and Audi. In order to ascertain the security of the asset, a number of things will be assessed; the V5 certificate of ownership, the trade value – as specified by a number of industry systems – auction history records, and a specialist will verify the trade value based on the car’s year, make, model and overall condition. The lender will then typically lend up to 50% of the car’s trade value.
From fine art to finance
Art collections are also a viable option. Leveraging fine art collections can be hugely beneficial for clients who are highly geared on their current properties and are struggling to release equity, for those who simply need a cash flow injection. For example, if a client was to sell artwork in order to finance a property purchase the transaction would be liable to capital gains tax (CGT), but if it is leveraged with a lender, both tax and transaction costs are eliminated and the client can retain the collection. The authors of the ‘luxury index’ have also stated that art is expected to be the best-performing luxury investment asset this year.
Not just for drinking: wine collections
There are some quirkier options, such as wine. Wine investment has become big business in recent years—in 2017, a Jeroboam-sized bottle of Domaine Romanée-Conti wine sold for approximately US$85,247 at a wine auction in Geneva. This is a clear illustration of just how valuable wine is considered by serious collectors, and certainly justifies why some specialist lenders are now happy to use wine as collateral.
Wine is also considered a low-risk form of security, with a 2010 study showing the value of ‘top-notch wine has withstood two US recessions and beaten a benchmark shares index over the past 13 years’. One of the advantages of wine as an asset is it is easy to value. Some luxury assets such as cars are worth huge sums, but it is difficult to value them objectively, whereas the fine wine market is easier to assess.
Investment grade handbags
It might seem whimsical, but handbags have increasingly proven themselves to be a valuable long-term investment. Auction houses Christie’s and Sotheby’s have both reported selling desirable handbags for more than $100,000, showing their immense potential value.
There’s even a ‘Rare Handbag Index’ which ‘tracks the value of investment-grade regularly traded handbags’, which reveals that investment handbags ‘have grown in value by 7.8% a year on average since 2004’.