THIS
IS MONEY
Online-
July 2000
Buying
wine as an investment
A s
home consumption of wine grows, consider not just drinking it, but keeping
it long enoughto make a profit. Buying your favourite Bordeaux and selling
it a few years later might mean that you can drink for free on the profit,
or how about layingdown some port for a 21st birthday present? It could
be a serious investment. Paul Bowker, former head of wine at Christie's
auctioneers and now on the wine advisory board atVinopolis, reckons if
you buy well, you can realistically see returns of 30% a year. Ofcourse,
like stocks and shares, wines can fall in value too, but at least you can
always drink the negative equity*.
Here
London's top wine experts offer some tips on building up a lucrative cellar.
Buy through a broker
Demand for fine wine exceeds supply and is strictlycontrolled. No house
in the world will sell direct to thepublic, so you have to buy through
a merchant. Thebest ones tend to be the most visible and well known.Your
broker will be your mentor, so choose the one you feel most comfortable
with.
Whether
you simply hand over a cheque or want tospend hours discussing tannins
and vintages, brokersshould not charge you a consultation or buying fee.They
will, however, take 10% commission when you come to sell, so factor this
in before buying.
Steven
Spurrier, chairman of the wine advisory board atVinopolis, has been a wine
educator, retailer and
investor for 35 years. He says four of the best merchants are Farr Vintners
(0171 821 2000), Berry Bros & Rudd (0171 396 9600), John Armit (0171
727 6846) and Corney & Barrow (0171 251 4051).
Buy quality
Less is more when you're buying to invest, so get hold of the top wines
from the top vintages. The usual investment unit is one case of 12 bottles.
If you've got £1,000, buy two £500 cases rather than five at
£200.
Since
1855, Bordeaux wines have been classified into five ranks.The crème
de la crème are thefirst growths, closely followed by the
super seconds; further down
come
the third, fourth and fifth growths. Fraser Jamieson , broker at
Berry Bros & Rudd, says the better the wine, the longer it takes to
mature: first growths will take 15 to 20 years. If you can afford
more than £1,000 per case, Bowker tips Château Lafite, Château
Latour, ChâteauMouton-Rothschild and Château Margaux.
Although
they have not yet been bottled, Jamieson says 1998 Pomerolsand St Emilions
have been excellent. They can be bought en primeur (before being released
on the open market) from £200 a case. The hot summer of 1996 produced
good vintages which are now coming onto theopen market; the wines of 1995
are softer and for early drinking.
Start with blue chips*
Just
as your first stock market investments are likely to be FTSE 100 companies,
your first wine investments
should
be Bordeaux. This is the seat of the finest red
wines
and has a track record for bottling the most
outstanding produce.
Jonathan
Stephens, director of Farr Vintners, says:
'Bordeaux produces more wine than any other region, so it is a sustainable
market.' There is also limited supply and high worldwide demand for
the really top-notch stuff, which is what makes it an investment. |
Store your wines
'in bond*'
Unless
you want to stroke your wines every night, store them 'in bond' in a warehouse.
If you store them at home, or want to release them to drink, you will have
to pay an import fee of £13 a case plus 17.5% VAT on the purchase
price.
To
store in bond you need to set up an account with a
broker and pay an annual storage charge of about £6 a case. Again,
factor in this cost before buying. As the
Inland
Revenue views wines as a 'wasting chattel', you
will not have to pay capital gains tax* on the profits you make on your
cellar.
Buy for the long term
According
to indices in the specialist magazine Decanter,wine prices have risen steadily
over the past 20 years.
In 1978, the Bordeaux index stood at 100. By 1998 it had grown more than
tenfold to 1,034.
At
a Christie's auction in September 1997, cases valued at a total of £3.5
million sold for £7 million. However, when the Asian crisis bit the
stock markets a month later, wine prices crashed. In 1998 many wines lost
20 to 40% of their value, but things are picking up again now.
Jamieson says: 'We are in a rising market, but don't
expect the phenomenal returns of mid-decade.'
Be
canny with your timing Wines are priced at three different stages:
en primeur, on arrival into the country two years later, and on maturity.
Wines from 1998 can now be bought en primeur. This is risky because the
wine has not yet matured, but by taking the gamble you will be able
to reserve stock which may be scarce when comes onto the open market. You
will also be able to secure it at a cheaper price.
Avoid champagne
A
couple of years ago, a handful of investment clowns
tried to con people into investing in champagne on the premise that
there would be a shortage come the
millennium. This is nonsense. Francoise Peretti, of the Champagne Information
Bureau, says: 'With more than a million bottles of champagne in the
cellars in Epernay -the champagne-producing region in France - there is
absolutely no shortage.'
Listen to the critics
Wines become a commodity when people start writing and talking about them.
Pay attention to the whims of American journalist Robert Parker, who gives
wines a score out of 100. Anything bearing a Parker score of 90-plus
is sure to be a sound investment. Parker produces a bi-monthly magazine,
The Wine Advocate. Subscription costs $85 (£56) a year. It is not
available in the UK, but to subscribe direct from America call 001 410
329 6477.
Buy port
Port is a stable, long-term investment. A good bottle of port should last
70 years, but because this is essentially a slow market, it should be held
for at least 10 years.Brands to look out for are Fonseca, Taylor's and
Graham.
Buy at auction
If you become really savvy, cut out the middleman and buy at auction. Spurrier
says: 'The trade buys at
auctions
and this is where investors who know a dozen or so wines inside out can
pick up real bargains.'
Updated January 2000. |