2015: The Bubble Bursts!
Discussion
I was looking at 996 Turbos last night, have they gone up a lot again.
I remember looking at these in 2009 ish and there were plenty in the £25-£30 region for ok ones... yet approaching 6 years on, or nearly double the age, they're probably more expensive.
It's not like they're 993s.
And with an even higher volume of arguably better 997.1 Turbos coming down the ranks the 996 are seeming over-valued imo.
Is there really a big enough market to prop 'older classic' 911's that aren't rare any more at such high prices?
The slightly interesting car used market has more bubbles in it than my weekly bubble bath!
Hopefully it'll pop before cash does, and I can splash some cash on something interesting!
Dave
I remember looking at these in 2009 ish and there were plenty in the £25-£30 region for ok ones... yet approaching 6 years on, or nearly double the age, they're probably more expensive.
It's not like they're 993s.
And with an even higher volume of arguably better 997.1 Turbos coming down the ranks the 996 are seeming over-valued imo.
Is there really a big enough market to prop 'older classic' 911's that aren't rare any more at such high prices?
The slightly interesting car used market has more bubbles in it than my weekly bubble bath!
Hopefully it'll pop before cash does, and I can splash some cash on something interesting!
Dave
Dave - anyone near the top end of the market is going to get hurt in the near future if they've bought at current valuations. Just can't believe where the values are heading particularly in Italian RHD low mileage cars.
Madness that I've seen recently = £750k for a good Daytona, £1m+ for a mint F40's, £1.2m for a Miura S, £350k for a Testarossa, £80k+ for 308 GT4 etc.
I posted on this issue a couple of months back as to the connections between the current bubble and the late 80's classic car bubble. It's gotten even worse since then. We're seeing enormous differences between buy and sell prices to point where it's almost completely disconnected. It's just not sustainable.
For example, if you bought that Testarossa advertised at Kahn for £350k, you'd be lucky to get £100k if you flipped it immediately. To make any kind of profit on that car, you'd need to see the value of an average Testarossa rise by at least £100k. It's not going to happen.
There's a £1.25m Miura advertised at Amari - they bought it for £600k, first advertised at £895k, raised the price 2 months later to £995k and now it's £1.25m (all within the space of 6 months). You'd probably have to see a £500k price increase in Miuras just to realise a profit.
There are a number of dealers/auction houses behaving in a pretty unscrupulous manner trying to prop up a very obvious bubble with ever increasing valuations for not especially rare cars. Will end in disaster.
Madness that I've seen recently = £750k for a good Daytona, £1m+ for a mint F40's, £1.2m for a Miura S, £350k for a Testarossa, £80k+ for 308 GT4 etc.
I posted on this issue a couple of months back as to the connections between the current bubble and the late 80's classic car bubble. It's gotten even worse since then. We're seeing enormous differences between buy and sell prices to point where it's almost completely disconnected. It's just not sustainable.
For example, if you bought that Testarossa advertised at Kahn for £350k, you'd be lucky to get £100k if you flipped it immediately. To make any kind of profit on that car, you'd need to see the value of an average Testarossa rise by at least £100k. It's not going to happen.
There's a £1.25m Miura advertised at Amari - they bought it for £600k, first advertised at £895k, raised the price 2 months later to £995k and now it's £1.25m (all within the space of 6 months). You'd probably have to see a £500k price increase in Miuras just to realise a profit.
There are a number of dealers/auction houses behaving in a pretty unscrupulous manner trying to prop up a very obvious bubble with ever increasing valuations for not especially rare cars. Will end in disaster.
Jimbo0912 said:
There are a number of dealers/auction houses behaving in a pretty unscrupulous manner trying to prop up a very obvious bubble with ever increasing valuations for not especially rare cars. Will end in disaster.
Agreed. If they sell one for a new top price then they can dust off the ones in their warehouse and make the same profit margin on them too.Questions:
If an investor owns 3 Ferrari 512TR (for example) is it in their interest to pay over the odds for the 4th? In so doing they can revalue the ones they already own at the higher price. Wonder how much effect this behaviour has on the market?
I also wonder how much collusion goes on in maintaining these record prices.
Bit late to the party here but my 2p:
Having been watching and participating in the second hand Ferrari and Porsche market for the last 5 years or so, for the cars valued up to say £100k that may have been 30-40% cheaper a few years ago, I don't think we're going to see a major correction although they will devalue due to minor drops and depreciation. The silly prices for TRs, Miuras etc etc that we're seeing won't last I think as people will start cashing out and numbers on the market have a disproportionate effect. I don't think people spend that much money unless there is a major "I'm going to make some cash out of this" motive 90% of the time. Anyway, back to the reason the sub-£100k cars won't see a correction....I'll illustrate it with my buying history/costs (in my garage for all to see) but the broad strokes are,:
1) At the bottom of the market in 2009 or so, I bought a 996 C4S for £25k from a dealer and traded it 13 months/10k miles later for £20.5k (should have been £500-£1k more, won't bore you with the details, but it was legit). So, fairly cheap motoring I thought. Prices were firming a bit when I sold since the better off could afford an above entry level 911 despite the crash.
2) In March 2010 I got into a 355 Spider from a dealer for £35k and 2.5 years/13k miles later I sold privately for £27.5k. I considered this fair price motoring at the time. The demand for 355s had not yet materialised as it subsequently did as while you could buy one for sensible 911 money, the talk was constantly about expensive maintenance and top end rebuilds (the latter which you don't hear of any more) so even though Mr Weekend 911 from (1) could probably afford one, he didn't want to be paying mega servicing on a still depreciating car as it was 2012 and things weren't all completely rosy for him yet
3) In Nov 2012 I got into, what was then, a pretty high priced 550 Maranello for £53.5k which as the time was near the top end for a non-garage queen. Again, Ferrari prices were still "normal" as Mr Weekend 911, while feeling better about the economy, wasn't comfortable enough to spunk that much money on an expensive toy. This all changed about 6 months later when it was all talk of green shoots of recovery etc etc. I distinctly remember everyone all of a sudden feeling more positive even if the actual economics didn't bear it out. It seemed to be all over the telly. But the key thing was that even if Mr Weekend 911 didn't have more money, he felt like he did and things seemed to be getting better. At about this time there also seemed to be an explosion of interest of first time Ferrari buyers on PH from memory.
IMO it was purely a confidence thing, and combined with
a) the people who'd "stuck it out" during the bad times waxing lyrical on places like PH about how good the cars were
b) the mags realising that, at a moment when the economy felt like it was turning for the better, a £40k as-near-as-makes-no-difference 500bhp V12 Ferrari that drove like a modern car was rather a bargain and that its even cheaper (355) or slightly newer (360) sisters were as well
The thing to remember is that most of the people who buy Ferraris/rarer Porsches in this part of the market are not the fabulously wealthy as most of the media would have the masses think. They're people who are doing well, but maybe where the choice is a bit more marginal as to whether they pull the trigger on a purchase or not, but they still have a large amount of money the could spend if they could justify it. They are Mr Weekend 911/Ferrari. These are the people for whom the recession was noticed, but never really had a real effect I suspect. And this is key, because they started buying not because they actually had more money, but because they were comfortable with spending it. And the final piece of the puzzle is that, because it was just a mental thing and they didn't have to wait til there was a real economic recovery, they've all flocked to buy the cheaper Ferraris and rarer Porsches already over the last 2 years driving the price rise. All of the Mr Weekend 911s are on the bandwagon already. And what of the people that had to wait to have more money in their pockets before buying? Well unfortunately, they're stuffed for the moment as while they could have bought and run a £40k 355, they can't do the same with a £65k 355. Hence why Ferrari 360, 355 and 550 asking prices have stagnated and even dropped a tad over the last 6 months or so, even now when we should be seeing the fabled, but never actually spotted, spring price rises of these cars. Of the people who bought these cars, most will probably cash out in dribs and drabs keeping the lid on prices, others will hold on to them more long term and enjoy the fact that the car is worth more than they paid a few years ago. Net result, we're not going to see any further increase in real value, but in the coming years inflation will erode away at the current values. I think in 5 years time or so we'll be back to Ferrari/rare Porsche affordability levels that we last saw 2-3 years ago.
Anyway, I put my money where my mouth is and cashed out of my 550 a few months ago with zero regrest so far and am putting my profit towards my first ever brand new car because I'm an idiot like that
And in a few years, I might get back into a Ferrari when it's all settled down a bit 
Having been watching and participating in the second hand Ferrari and Porsche market for the last 5 years or so, for the cars valued up to say £100k that may have been 30-40% cheaper a few years ago, I don't think we're going to see a major correction although they will devalue due to minor drops and depreciation. The silly prices for TRs, Miuras etc etc that we're seeing won't last I think as people will start cashing out and numbers on the market have a disproportionate effect. I don't think people spend that much money unless there is a major "I'm going to make some cash out of this" motive 90% of the time. Anyway, back to the reason the sub-£100k cars won't see a correction....I'll illustrate it with my buying history/costs (in my garage for all to see) but the broad strokes are,:
1) At the bottom of the market in 2009 or so, I bought a 996 C4S for £25k from a dealer and traded it 13 months/10k miles later for £20.5k (should have been £500-£1k more, won't bore you with the details, but it was legit). So, fairly cheap motoring I thought. Prices were firming a bit when I sold since the better off could afford an above entry level 911 despite the crash.
2) In March 2010 I got into a 355 Spider from a dealer for £35k and 2.5 years/13k miles later I sold privately for £27.5k. I considered this fair price motoring at the time. The demand for 355s had not yet materialised as it subsequently did as while you could buy one for sensible 911 money, the talk was constantly about expensive maintenance and top end rebuilds (the latter which you don't hear of any more) so even though Mr Weekend 911 from (1) could probably afford one, he didn't want to be paying mega servicing on a still depreciating car as it was 2012 and things weren't all completely rosy for him yet
3) In Nov 2012 I got into, what was then, a pretty high priced 550 Maranello for £53.5k which as the time was near the top end for a non-garage queen. Again, Ferrari prices were still "normal" as Mr Weekend 911, while feeling better about the economy, wasn't comfortable enough to spunk that much money on an expensive toy. This all changed about 6 months later when it was all talk of green shoots of recovery etc etc. I distinctly remember everyone all of a sudden feeling more positive even if the actual economics didn't bear it out. It seemed to be all over the telly. But the key thing was that even if Mr Weekend 911 didn't have more money, he felt like he did and things seemed to be getting better. At about this time there also seemed to be an explosion of interest of first time Ferrari buyers on PH from memory.
IMO it was purely a confidence thing, and combined with
a) the people who'd "stuck it out" during the bad times waxing lyrical on places like PH about how good the cars were
b) the mags realising that, at a moment when the economy felt like it was turning for the better, a £40k as-near-as-makes-no-difference 500bhp V12 Ferrari that drove like a modern car was rather a bargain and that its even cheaper (355) or slightly newer (360) sisters were as well
The thing to remember is that most of the people who buy Ferraris/rarer Porsches in this part of the market are not the fabulously wealthy as most of the media would have the masses think. They're people who are doing well, but maybe where the choice is a bit more marginal as to whether they pull the trigger on a purchase or not, but they still have a large amount of money the could spend if they could justify it. They are Mr Weekend 911/Ferrari. These are the people for whom the recession was noticed, but never really had a real effect I suspect. And this is key, because they started buying not because they actually had more money, but because they were comfortable with spending it. And the final piece of the puzzle is that, because it was just a mental thing and they didn't have to wait til there was a real economic recovery, they've all flocked to buy the cheaper Ferraris and rarer Porsches already over the last 2 years driving the price rise. All of the Mr Weekend 911s are on the bandwagon already. And what of the people that had to wait to have more money in their pockets before buying? Well unfortunately, they're stuffed for the moment as while they could have bought and run a £40k 355, they can't do the same with a £65k 355. Hence why Ferrari 360, 355 and 550 asking prices have stagnated and even dropped a tad over the last 6 months or so, even now when we should be seeing the fabled, but never actually spotted, spring price rises of these cars. Of the people who bought these cars, most will probably cash out in dribs and drabs keeping the lid on prices, others will hold on to them more long term and enjoy the fact that the car is worth more than they paid a few years ago. Net result, we're not going to see any further increase in real value, but in the coming years inflation will erode away at the current values. I think in 5 years time or so we'll be back to Ferrari/rare Porsche affordability levels that we last saw 2-3 years ago.
Anyway, I put my money where my mouth is and cashed out of my 550 a few months ago with zero regrest so far and am putting my profit towards my first ever brand new car because I'm an idiot like that
And in a few years, I might get back into a Ferrari when it's all settled down a bit Birkin1932 said:
did somebody mention inflation?
How about deflation and then hyper inflation.Things are only worth what people are ultimately willing to pay.
If/when the s
t hits the fan from this long-building economic bubble of debt, which didn't really burst in 2007/8, then the values of things will be revalued based on markets actually finding real values for things.People won't just stick a finger in the air based on inflation * time + price in 2005. The value will have to be discovered based on what people are willing to pay.
It's so easy to apply RPI/CPI (aka made up corrections) to values over time and say things got cheaper/more expensive.
But what about supply and demand forces?
There is no argument in the case of cars for example, that demand was high in the credit boom (95-05) and saw all the prestige marques go up in volume massively, along with high end normal stuff like M3s and RS Audis and the like.
In a re-normalised landscape I really doubt there will be a market large enough to sustain an aging population of prestige and sports cars at the values we've seen. Inflation or not, pure supply/demand will resolve valuation of the glut of stuff from that boom era!
Dave
Used Car Values to 'Burst'. Interesting sector analysis from UHY Chartered Accountants:
http://www.uhy-uk.com/resources-publications/servi...
http://www.uhy-uk.com/resources-publications/servi...
At Silverstone auctions today a lot of lots underperformed or went unsold:
The following all underperformed (hammer prices shown):
Ferrari 456 manual LHD (yellow with blue interior!) £28k (Guide £28k to £32k)
Ferrari Testarossa LHD with 27k miles. £77k (Guide £80k to £90k)
Ferrari 308 GT4 Dino £29k (Guide £30 to £35k)
Ferrari Mondial QV with 29k miles £17.5k (Guide £18k to £21k)
Ferrari 348TB LHD with 30k miles £24.5k (Guide £28k to £30k)
Ferrari 308 GTB (cat D repaired) £27k (Guide £34k to £38k)
Porsche 1968 911 Coupe £42k (Guide £45k to £55k)
Porsche 1971 T Targa £34k (Guide £38k to £40k)
It would be rude of me not to also mention the good performers: Porsche 911 GT2 RS LHD £210k, BMW Z8 £110k, Ferrari 348 Spider £57k and Porsche 996 GT2
The following all underperformed (hammer prices shown):
Ferrari 456 manual LHD (yellow with blue interior!) £28k (Guide £28k to £32k)
Ferrari Testarossa LHD with 27k miles. £77k (Guide £80k to £90k)
Ferrari 308 GT4 Dino £29k (Guide £30 to £35k)
Ferrari Mondial QV with 29k miles £17.5k (Guide £18k to £21k)
Ferrari 348TB LHD with 30k miles £24.5k (Guide £28k to £30k)
Ferrari 308 GTB (cat D repaired) £27k (Guide £34k to £38k)
Porsche 1968 911 Coupe £42k (Guide £45k to £55k)
Porsche 1971 T Targa £34k (Guide £38k to £40k)
It would be rude of me not to also mention the good performers: Porsche 911 GT2 RS LHD £210k, BMW Z8 £110k, Ferrari 348 Spider £57k and Porsche 996 GT2
Edited by 355Chris355 on Saturday 28th March 17:03
Edited by 355Chris355 on Monday 30th March 13:41
355Chris355 said:
My turn to prophesize that the end is nigh.
As a Pher you'll have no doubt heard all the arguments as to why this is different to the 90's and in many ways it is. There's no doubt the market was undervalued at the turn of the century but the current trajectory has the fragrant aroma of Tulips. Unlike the 90's interest rates are not going to spike up to 15% but this boom will be brought down by different factors.
These are the two key factors that will end the boom in the UK:
(1) Exchange Rates
A European Holiday will be much cheaper this year thanks to the strong £ (weak €) following the announcement of QE and uncertainty in Greece. Before 2007 the exchange rate was between €1.4 and €1.5. It almost reached parity in 2009 thanks to the financial crisis and the UK's exposure to the banking industry. It's taken until January 2015 for us to surpass €1.30.
The steep drop in the exchange rate during the recession meant that buying a new Italian car from 2009 onwards became much more expensive. Think of the price differential between a Ferrari 458 and a F430. In addition, production was lower due to the global recession. The result is that the prices of used supercars has been very strong.
As the € weakens, the above effects are reversed. The price disparity between UK rhd cars and European lhd cars is now very very wide. I'd encourage you to visit http://www.autoscout24.com and see for yourself. It makes the prices advertised by UK Dealers for lhd cars look rather 'cheeky' (that's me being polite).
Given the political landscape in Europe I can see the pound gaining more ground against the euro... €1.4 if you want an exact prediction (assuming no ones silly enough to vote for Red Ed).
The Pound also took a beating from the Australian Dollar during the recession. As a result, the export market to Australia has thrived. Thanks to the commodities slump this is now reversing. After reaching a nadir in 2013 of 1.45 AUD to the pound, sterling has strengthened to 1.95 AUD to the pound. I doubt there will be much interest from that side of the globe anymore.
(2) New Car Registrations
Once again the recession hit the new car market hard. The result is that less used cars came onto the market and residuals remained high. This trend is now being reversed following 34 consecutive months of increasing new car sales.
Reaching a 10 year high in 2014 with almost 2.5million cars sold. Please link from SMMT below:
http://http://www.smmt.co.uk/2015/01/uk-new-car-re...
This trend is driven by people who delayed purchasing new cars during the recession, PPI windfalls and amazingly cheap PCP deals.
The result is that there will be an ever increasing supply of used cars onto the market. This effect will start this year and continue as more 2 and 3year deals come to an end. This increased supply will depress used car values and provide alternatives to the overvalued classic car market.
Conclusion
These two factors alone are enough to stop the exponential growth in prices. As prices moderate, 'investors' will question why they're spending money servicing and storing a depreciating asset. The smart investors will already be quietly leaving the room. The average car enthusiast will benefit from being able to buy and enjoy the car of there dreams.
Many Thanks for reading my post. I look fwd to your responses.
Disclaimer: The opinions I've expressed do not constitute investment advice. Independent advice should be sought were appropriate.
2 months on and things are still booming though ime....As a Pher you'll have no doubt heard all the arguments as to why this is different to the 90's and in many ways it is. There's no doubt the market was undervalued at the turn of the century but the current trajectory has the fragrant aroma of Tulips. Unlike the 90's interest rates are not going to spike up to 15% but this boom will be brought down by different factors.
These are the two key factors that will end the boom in the UK:
(1) Exchange Rates
A European Holiday will be much cheaper this year thanks to the strong £ (weak €) following the announcement of QE and uncertainty in Greece. Before 2007 the exchange rate was between €1.4 and €1.5. It almost reached parity in 2009 thanks to the financial crisis and the UK's exposure to the banking industry. It's taken until January 2015 for us to surpass €1.30.
The steep drop in the exchange rate during the recession meant that buying a new Italian car from 2009 onwards became much more expensive. Think of the price differential between a Ferrari 458 and a F430. In addition, production was lower due to the global recession. The result is that the prices of used supercars has been very strong.
As the € weakens, the above effects are reversed. The price disparity between UK rhd cars and European lhd cars is now very very wide. I'd encourage you to visit http://www.autoscout24.com and see for yourself. It makes the prices advertised by UK Dealers for lhd cars look rather 'cheeky' (that's me being polite).
Given the political landscape in Europe I can see the pound gaining more ground against the euro... €1.4 if you want an exact prediction (assuming no ones silly enough to vote for Red Ed).
The Pound also took a beating from the Australian Dollar during the recession. As a result, the export market to Australia has thrived. Thanks to the commodities slump this is now reversing. After reaching a nadir in 2013 of 1.45 AUD to the pound, sterling has strengthened to 1.95 AUD to the pound. I doubt there will be much interest from that side of the globe anymore.
(2) New Car Registrations
Once again the recession hit the new car market hard. The result is that less used cars came onto the market and residuals remained high. This trend is now being reversed following 34 consecutive months of increasing new car sales.
Reaching a 10 year high in 2014 with almost 2.5million cars sold. Please link from SMMT below:
http://http://www.smmt.co.uk/2015/01/uk-new-car-re...
This trend is driven by people who delayed purchasing new cars during the recession, PPI windfalls and amazingly cheap PCP deals.
The result is that there will be an ever increasing supply of used cars onto the market. This effect will start this year and continue as more 2 and 3year deals come to an end. This increased supply will depress used car values and provide alternatives to the overvalued classic car market.
Conclusion
These two factors alone are enough to stop the exponential growth in prices. As prices moderate, 'investors' will question why they're spending money servicing and storing a depreciating asset. The smart investors will already be quietly leaving the room. The average car enthusiast will benefit from being able to buy and enjoy the car of there dreams.
Many Thanks for reading my post. I look fwd to your responses.
Disclaimer: The opinions I've expressed do not constitute investment advice. Independent advice should be sought were appropriate.
Edited by 355Chris355 on Sunday 1st February 20:28
Edited by 355Chris355 on Sunday 1st February 21:52
When stuff is high and it's only kept high because people think it'll go higher so hop in at already high prices, you know your staring at a bubble.
If you hop on to anything you need to make sure you can hop back off before the top.
Anything you can easily buy with cheap credit will be bubbled more than most.
Hmmm
If you hop on to anything you need to make sure you can hop back off before the top.
Anything you can easily buy with cheap credit will be bubbled more than most.
Hmmm
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