Why Invest in Wine? UKV PLC Explains

September 6, 2017 - By 

There is a unique dynamic in fine wine investment that consistently makes it a good risk.

Wines appreciate in price as they become more desirable and rarer. They become more desirable because they improve with age. They become rarer because people drink them.

Bordeaux seconds, for example, are commanding up to 600 percent of their 2003 value.

With a little wine-buying savvy and the discipline to keep your assets corked, you could see satisfying returns for years to come.

HIGH DEMAND IN UNCERTAIN TIMES

Since the Brexit vote, the pound has weakened. Prices for prime properties in London have dropped by as much as 20 percent in some areas. The financial outlook in Paris and Frankfurt is increasingly gloomy.

Even in such uncertain times, fine wine is in unprecedented demand. It has secured the top return for the last two decades, outpacing stocks, art and even gold. Financial advisers across the land are regularly urging clients of high net worth to focus on their wine cellars.

For the first time in history, private enthusiasts are investing more in wine than in classics cars. That’s not surprising given wine’s 12 to 15 percent returns. Trading is up 20 percent since Brexit.

Are wine prices at their peak? Is an inevitable decline looming in the near future? No one can say with certainty, of course, but the same concerns were voiced throughout the Iraq War and the 2008 banking crisis. Naysayers were proven wrong when investors started getting rich.

Wine is a finite stock. Once a rare vintage is consumed, there’s no replacing it. As global supplies are gradually depleted, demand holds steady or increases. Prices appreciate.

Meanwhile, a new batch of grapes is harvested at a premier vineyard somewhere in the world. The cycle of supply and demand begins again.

For patient investors who seek a safe alternative to disappointing markets, fine wine is a most promising option.

WORLDWIDE ENTHUSIASM

Emerging global markets triggered the most recent trading frenzy. Interest in both drinking and investing in fine wines has surged in Brazil, Russia, India and China.

Newly affluent Chinese urbanites have an increasing passion for red wines. In 2013, they bought more than 1.8 billion bottles. Shockingly, China took France’s place as market leader.

In October 2017, the most expensive lot of wine ever to hit the auction block was sold at Sotheby’s in Hong Kong for 1,035,000 pounds. Apparently, the anonymous Asian buyer isn’t willing to share.

Enthusiasm for wine is spreading like wildfire all over the globe.

STARTING A COLLECTION

If this is your first foray into wine investment, you’ll need sound advice from a professional consultant who knows the industry.

In general, though, all the experts agree that quality should take precedence over quantity. You’re better off buying one case of a fine, rare wine than many cases of a wine of inferior quality. Financial advisers recommend a minimum investment of 10,000 pounds.

Seek out wines with excellent records that are in consistent global demand. Several first-growth Bordeaux, for instance, have been making investors smile for centuries. Rhone and Burgundy wines are more recent high performers.

As with any trade-able commodity, prices fluctuate all the time. It’s prudent to read up on current market values, and the internet has made that easy to do.

Wine investments call for patience, and a hold of at least five years is strongly recommended. This gives the wine time to become scarcer and command a higher price in the future.

A combination of high demand, solid provenance and good vintage could send you into a luxurious early retirement.

Related: UKV PLC’s Top Tips for Novice Wine Drinkers

SPECIAL BENEFITS

There are several unique benefits to investing in wine rather than precious metals, art or cars.

One pertains to taxes. The wine sector is one of the last in which private investors are not taxed on capital gains. According to the Taxation of Chargeable Gains Act of 1992, wine is a wasting asset whose predictable life does not exceed more than 50 years. Other tax treatments vary depending on how the product is bought and sold, but it is still an exceptionally tax-efficient investment.

An additional benefit is full ownership. Like desirable properties in long-established areas of town, superior wines from the foremost chateaux retain their intrinsic value for ages. They are tangible assets that you own and control.

Finally, you needn’t worry about theft or damage of your prized wines. They are fully insurable at replacement value.

Your collection should undoubtedly be stored in a bonded, government-regulated warehouse. Security is tight. Temperature, light and other factors that can affect quality are strictly monitored. Provenance is protected.

The storage charge, approximately 10 to 12 pounds per case annually, may be adjusted to include insurance. If you prefer, you may purchase it independently.

RISKS

No investment comes with guarantees or without risks.

In the wine industry, the market is not regulated. Unpredictable influences can affect prices.

Experienced wine merchants are the best people to ask for advice on building an impressive collection. Financial advisers are the best people to talk to about the risks involved with investments of any kind.

ABOUT UKV PLC

UKV PLC is one of the most respected wine brokerages in the United Kingdom. Highly knowledgeable professionals oversee the acquisition and sale of some of the finest investment-grade wines in the world. UKV PLC’s prestigious labels hail from leading vineyards in Italy, Spain and France; the Champagne region is especially well-represented.

From the time that you contact UKV PLC, you’ll receive outstanding personal service. A consultant will meet with you at the home office in Surrey, the office in London or even in the privacy and comfort of your own home. When you become a client, a dedicated consultant will keep you advised on current trends and movements in the market.

There’s no better time to invest in the future by investing in fine wines from UKV PLC, and there’s no better way to mix business with pleasure.

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