It’s that time of year again when the press is full of reports of the latest vintage from Bordeaux. Over the next couple of months the 2010 vintage will be unveiled and marketed to thirsty punters. Many articles will discuss the pleasures, or otherwise, of drinking these wines and some will look at the investment potential. Some will question whether the wine-buying public has the stamina for two ‘vintages of a lifetime’ back-to-back and a few will explore the new supply-and-demand equation brought about by the growth of the Asian market. Is wine a drink or a commodity to be traded?
Increasingly, it can be viewed as an investment – the supply from the most sought-after chateaux is finite and demand is growing. So there is an inevitability that prices will continue to rise for as long as this imbalance remains. In 2010, says Liv-Ex, an electronic exchange for the trading of wine-by-wine businesses, prices of the top 100 wines grew by just over 35%. Gains over previous years have generally been in double digits too. Furthermore, the Inland Revenue currently regards wine as a “wasting asset” and therefore there is potential to benefit from price increases exempt from Capital Gains Tax.
Investors looking to get involved in the wine market should take care, though. Many wines have seen little or no appreciation in recent years. Expert advice is essential when it comes to sourcing the right wines at the right price so as not to be left with non-performing wines that may be difficult to sell in the future. Some wine investment schemes, such as Grand Cru Investments, offer you the ability to store the wines in your own name in a government-approved bonded warehouse. In this way, you retain title to your physically available wines and will not lose out if a negotiant in Bordeaux, a wine merchant, or a wine fund goes bust. Storage in recognised facilities is essential to guarantee the quality of the wine and ensure the best possible selling price.
Will the 2010 vintage offer great returns? It is difficult to say at this point, but it seems likely that smart money will be looking at older vintages for better returns than those possible from what is likely to be a highly-priced one.
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