Luxury goods – a ‘safe haven’ investment?

Last year, as the UK economy continued to struggle and inflation soared, Investors Chronicleran an article about luxury goods and their potential to weather economic storms in comparison to more ‘traditional’ investments like stocks and shares.

It was an article that resonated with us at the time because we were busy exploring in detail the investment potential of luxury items, particularly high-end watches, fine wines and rare whiskies, for our Private Wealth Guide for 2022/23. We discovered that watches and wine had enjoyed astonishing annual growth of 16% in the year to Q4 2021, while the value of whisky had grown by a smaller but nevertheless impressive 9%, according to Knight Frank’s Luxury Investment Index.

All of this in spite of the economic turmoil that has characterised the years since the onset of the coronavirus pandemic.

Why do luxury products bear up so well in turbulent economic times?

Firstly, it’s important to point out that luxury goods are by no means recession-proof, and past performance is no guarantee of the same in the future. That’s why it’s always wise to take professional financial advice before deciding on an appropriate investment strategy for your circumstances.

Even so, the article published in Investors Chronicle pointed out that the luxury goods market had proved to be “surprisingly resilient in previous downturns.” It continued:

“It has been demonstrated that in times of inflation, demand for luxury goods often increases as heritage brands hold value and will not depreciate. Add in the fact that well-heeled customers struggle less during economic slumps and you can see why the luxury goods sector is a viable option for investors, even though it may appear counter-intuitive to some.”

Knight Frank’s Andrew Shirley, who is responsible for compiling its luxury goods index, added: “The Covid-19 pandemic certainly hasn’t dented the enthusiasm of collectors who have continued to pay significant amount of money for an increasingly eclectic mix of assets including basketball sneakers, comics and even meteorites.”

What does 2023 hold?

According to global management consulting firm Bain & Company, the global luxury goods market has gone from strength to strength in the years following the pandemic, growing by an estimated 19-21% last year.

In 2023, the luxury goods market is set to see further expansion in spite of current economic turbulence. Depending on how the year plays out, Bain & Company estimate growth of between 3% and 8%. Looking further ahead, the outlook is extremely positive, with the global value of the personal luxury goods market set to grow to between $540 billion and $580 billion by 2030, up 50% or more on 2022’s figure.

One trend that luxury investors should be keeping their eye on is the rising popularity of reselling. Luxury brands are increasingly interested in taking control of their own second-hand markets, in response to significant consumer interest in shopping sustainably. This will present excellent opportunities for investors who stand to benefit from the authenticity that reselling items directly through the original brand will bring.

Sourcing luxury items in Hertfordshire and Essex

Our Private Wealth Guide always focuses closely on our home counties of Hertfordshire and Essex, so we love to showcase local opportunities to pursue your passions and grow your wealth. Here are some of the businesses helping wealthy clientele to take advantage of excellent investment opportunities whilst indulging their passion for luxury goods.

Arkley Fine Art, Hitchin– fine art gallery

Bonds Jewellers, Brentwood – Rolex and luxury watch dealers

Vintage Associates, Potters Bar – fine wine investment specialists

Whisky Investment UK, Basildon – fine whisky investment specialists

Xupes, Bishop’s Stortford – pre-loved luxury jewellery, watches, bags and accessories

Zee & Co., Loughton– high-end fashion brands, accessories and footwear

Keep following for more private wealth news and articles

We hope you enjoyed this article. To read more articles exploring a range of topics pertaining to growing, maintaining and preserving your wealth for the future, please visit our private wealth blog or follow us on social media using the hashtag #PrivateWealthGuide.

Alternatively, you might want to read our Private Wealth Guide online – click on the links below to see our Guides for each county.

Click here to view our guide to Hertfordshire

Click here to view our guide to Essex