RE: PH Blog: boom and bust?
Discussion
I have followed the auction market from a dispassionately financial perspective over the last years and came to the conclusion that the market as a whole is not experiencing a bubble. Rather, some cars are overvalued, but many still present massive growth potential.
It is therefore a very different situation from 1990 (incidentally the only real bubble moment in the history of the classic car market), when everything with four wheels started to grow by 50% per year (including new, mediocre cars: somebody above mentioned the crazy prices reached by brand new Mondial Ts at the time...).
Now growth is more subdued (highest current growth rate is about 20% p.a., and only for very few cars: GTOs, DB6s, Miura SV), and much less widespread.
Moreover, macroeconomic factors seem to provide even more growth potential to the market: BRIC countries have yet to enter it (remember what Japan caused in the 1980s when it did!); whereas in mature western markets more and more people are attracted to classic rather than contemporary machinery, with classic cars seen as more acceptable socially and environmentally (a Dino parked outside a Hoxton Club is perceived as much cooler than a 458, not by petrolheads, but by urban girls on boris bikes...).
That said, prices above £200k for a Dino 246 or £300k for a 993GT2 are difficult to sustain, but I challenge you to call exaggerated the current values of a Dino 308 or of basically any front-engined Porsche.
Ultimately the definition of a bubble is that it will burst, bringing values down: I think that imagining the value of cars like Carrera Gt, 365GTC/4, BB, Maserati 3500GT, Fiat Dino, 996GT3, F50, EB110 (the list could go on for ages) is just wishful thinking. Or wishful schadenfreude.
Here a link to the english translation of the italian article I just published on the matter: http://trusvalt.com/uploads/Oro%20su%20ruote%20-%2...
It is therefore a very different situation from 1990 (incidentally the only real bubble moment in the history of the classic car market), when everything with four wheels started to grow by 50% per year (including new, mediocre cars: somebody above mentioned the crazy prices reached by brand new Mondial Ts at the time...).
Now growth is more subdued (highest current growth rate is about 20% p.a., and only for very few cars: GTOs, DB6s, Miura SV), and much less widespread.
Moreover, macroeconomic factors seem to provide even more growth potential to the market: BRIC countries have yet to enter it (remember what Japan caused in the 1980s when it did!); whereas in mature western markets more and more people are attracted to classic rather than contemporary machinery, with classic cars seen as more acceptable socially and environmentally (a Dino parked outside a Hoxton Club is perceived as much cooler than a 458, not by petrolheads, but by urban girls on boris bikes...).
That said, prices above £200k for a Dino 246 or £300k for a 993GT2 are difficult to sustain, but I challenge you to call exaggerated the current values of a Dino 308 or of basically any front-engined Porsche.
Ultimately the definition of a bubble is that it will burst, bringing values down: I think that imagining the value of cars like Carrera Gt, 365GTC/4, BB, Maserati 3500GT, Fiat Dino, 996GT3, F50, EB110 (the list could go on for ages) is just wishful thinking. Or wishful schadenfreude.
Here a link to the english translation of the italian article I just published on the matter: http://trusvalt.com/uploads/Oro%20su%20ruote%20-%2...
virgilio said:
I have followed the auction market from a dispassionately financial perspective over the last years and came to the conclusion that the market as a whole is not experiencing a bubble. Rather, some cars are overvalued, but many still present massive growth potential.
It is therefore a very different situation from 1990 (incidentally the only real bubble moment in the history of the classic car market), when everything with four wheels started to grow by 50% per year (including new, mediocre cars: somebody above mentioned the crazy prices reached by brand new Mondial Ts at the time...).
Now growth is more subdued (highest current growth rate is about 20% p.a., and only for very few cars: GTOs, DB6s, Miura SV), and much less widespread.
Moreover, macroeconomic factors seem to provide even more growth potential to the market: BRIC countries have yet to enter it (remember what Japan caused in the 1980s when it did!); whereas in mature western markets more and more people are attracted to classic rather than contemporary machinery, with classic cars seen as more acceptable socially and environmentally (a Dino parked outside a Hoxton Club is perceived as much cooler than a 458, not by petrolheads, but by urban girls on boris bikes...).
That said, prices above £200k for a Dino 246 or £300k for a 993GT2 are difficult to sustain, but I challenge you to call exaggerated the current values of a Dino 308 or of basically any front-engined Porsche.
Ultimately the definition of a bubble is that it will burst, bringing values down: I think that imagining the value of cars like Carrera Gt, 365GTC/4, BB, Maserati 3500GT, Fiat Dino, 996GT3, F50, EB110 (the list could go on for ages) is just wishful thinking. Or wishful schadenfreude.
Here a link to the english translation of the italian article I just published on the matter: http://trusvalt.com/uploads/Oro%20su%20ruote%20-%2...
I think you are exactly right. It is therefore a very different situation from 1990 (incidentally the only real bubble moment in the history of the classic car market), when everything with four wheels started to grow by 50% per year (including new, mediocre cars: somebody above mentioned the crazy prices reached by brand new Mondial Ts at the time...).
Now growth is more subdued (highest current growth rate is about 20% p.a., and only for very few cars: GTOs, DB6s, Miura SV), and much less widespread.
Moreover, macroeconomic factors seem to provide even more growth potential to the market: BRIC countries have yet to enter it (remember what Japan caused in the 1980s when it did!); whereas in mature western markets more and more people are attracted to classic rather than contemporary machinery, with classic cars seen as more acceptable socially and environmentally (a Dino parked outside a Hoxton Club is perceived as much cooler than a 458, not by petrolheads, but by urban girls on boris bikes...).
That said, prices above £200k for a Dino 246 or £300k for a 993GT2 are difficult to sustain, but I challenge you to call exaggerated the current values of a Dino 308 or of basically any front-engined Porsche.
Ultimately the definition of a bubble is that it will burst, bringing values down: I think that imagining the value of cars like Carrera Gt, 365GTC/4, BB, Maserati 3500GT, Fiat Dino, 996GT3, F50, EB110 (the list could go on for ages) is just wishful thinking. Or wishful schadenfreude.
Here a link to the english translation of the italian article I just published on the matter: http://trusvalt.com/uploads/Oro%20su%20ruote%20-%2...
The market now is nothing like the late 80's and is much more selective. Certain cars do seem to have risen beyond logic and no doubt there will be some re-adjustent but overall I don't see it as a bubble waiting to burst.
At the very top end of the market there are an ever-increasing number of wealthy people chasing a finite number of cars.
RatLad said:
Excuse the novice question, however can anyone turn up to these auctions and what is the best way of keeping track of when thye occur?
Anyone can turn up, but you'll need to buy a catalogue to get in, and that's usually around £30. In the case of RM at least the catalogue is a lovely thing - a pretty heavy book full of well shot photography about every car. Some would say that the catalogues are worth half the entry price at least.Best way of keeping track of them is buy Classic & Sports Car (apparently other classic car mags are available
) and look at the adverts or the auction calendar section. The next big round of sales will be the pre-Christmas sales early in December. However the high points in the auction calendar when the really big stuff comes to sale are really gone for 2012. For 2013 it's worth planning around; January (Scottsdale in Arizona), May (Monaco), July (Festival of Speed), August (Monterey Week), September (Goodwood Revival), October (RM London) with others dotted around these high points.r129sl said:
I thought this about house prices in 2001...
Right thought at the wrong time. Buy markets like classic cars won't have govt interference to stimulate a boom or to artificially maintain a bubble. In a more pure and non political market where you don't have state interference it's more obvious.
The current bubble for cars will burst either when a fiscal event triggers the need for a large number of owners to sell (in the late 80s in the UK the bankrupting of 30,000 wealthy Lloyds Names was such a trigger event that helped sign post the bursting of the bubble. Those 30,000 had bought terrific numbers of classic cars for both personal and CGT purposes and suddenly had to sell them);
Or the bubble will burst when other asset classes suddenly become more rewarding. What will happen there is that the super wealthy who have a large collection will be advised to release a number of vehicles to auction and redistribute the proceeds into a different section of the portfolio. This will be fine for a while but slowly the professional market will begin to note this effect and then suddenly you'll have a series of sales failing at auction and the information becomes public. Others then think they should cash out and supply openly increases but at the same time demand contracts as the savvy buyers are now on the sales side of the book. Finally, you are left with the chap who may have around £1m in savings and put half of that into his dream car, an F40 while using the other cash to invest elsewhere. He has a sudden liquidity squeeze then sees the value of his primary asset falling at each auction and he eventually capitulates as he needs cash and dumps his £500k car for £150k defining the new low of the market.
Savvy buyers will then appear and knowing that the population is ever growing so demand for old cars will grow and knowing that supply is low and fixed on old cars will start buying them up. A few years later the general market will have woken up to the rises and start buying again. Towards the end you will see people chucking their life savings in, mad auction prices, articles saying it will go on forever, people setting up investment funds that make the asset liable for CGT thus undoing the exact reason why some of the rises exist and minicab drivers telling you to buy old SLs.
But, the bubble should have burst in 2007 with the financial crisis and indeed prices wobbled as some forced sellers appeared but the geopolitical events of Govts hiking taxes on the wealthy, devaluing cash by printing, fear of holding cash due to bank default risk, the fear of rampant inflation and the desire to hold transportable wealth or the need to 'clean' untaxed money has forced demand and so prices sky high.
Classic cars will always go up in value. There are a fixed number of cars and an ever growing number of buyers plus cash will always devalue due to inflation. But never in a straight line. It's a market that is no different from any other.
mph said:
CraigyMc said:
I'm shocked a proper E type of that provenance didn't make £120K. Shocked, I tells you!
C
Despite the blurb it wasn't the best restoration and when a friend went to view pre-sale they couldn't find any paperwork.C
I'm surprised they are allowed to get away with that. Explains why the car didn't sell though.
C
carnut360 said:
I went to the auction, looking to buy the Dayton, as it was the best looking one i have ever seen. I am an enthusiast, and want to have the cars i lusted over when i was a boy and can now afford, or rather can't afford, as it went for more than my maximum bid, but what it has done has enabled me to be able to properly restore an old daytona, yes i would like to have some 'profit' in it but more that that will be to have a piece of automotive art, something to be able to drive when (and if) the weather is nice, to drive accross europe do some mountian passes and tunnels. prices well i would rather have an old imaaculate daytona than a new car. if it depreciates so be it, if it appreciates great, but i think people are buying classics because they now can afford them like me, if i sold my daytona what else would i want to buy! 
Well said and all the best in your plans for restoring a Daytonak-ink said:
It is all relative. Don't forget some people spend £100m on a yacht, then £100k filling it up with fuel every week. To these people classic cars are pocket money. Many fine examples are probably cheaper than their dress watch.
True. The majority of buyers are not in this league though and the car is a noteable asset, so easy potential for stock to arrive on the supply side.Another factor that can trigger a sell off is the discovery that some of these top end motors are 'fake', where fake being a serious debate over originality. These events will sow doubt in valuations and remove demand side pressure, which again can be a catalyst for the sell off.
It's also important to note that things like uber yachts are often bought using complex financial structures based around debt rather than the owner placing physical cash, the reason being to avoid local taxes which can be substantial. If your money is in Switzerland and you are a global non resident for tax purposes then you don't want to be delivering £100m physical into a taxable regieme. So, even if an owner is super wealthy you can reach situations where assets need to be sold to firm up security on a bespoke structured product.
Muppetracer said:
Well, it's a lot of factors - the complexity of the car - an interestingly, a Dino is a more complicated restoration than a lot of other Ferraris - but the main factor is the cost that the specialists can command. A minor can be done satisfactorily by a competent, local restorer at a pretty cheap hourly rate, all the bits are dirt cheap - you can probably by a cylinder head for £100, and the finish people are looking for in a Minor is fairly simple. Ferrari specialists are in a different universe from an hourly rate perspective. I know a guy who recently gave his (fairly mint) Daytona to a well known marque specialist, asking them to 'go over it, put a few things right, give it a tune up, and generally get it ready for a road rally he was participating in'. He was presented with a £60K bill for that work.....I'm not saying it's right or even justifiable - it's just the way it is. Having said that, my father had a pre-war BMW 328 sports car re-sprayed by Europe's leading specialists in pre-war BMWs, about 20 years ago. The stripping of the old paint, the panel beating, lead filling, spray work and re-fitting cost £20K - that was 20 years ago - and that was just a 'paint job'.
Now I know a bodyshop who paints vintage Bentley's, classic race cars (including some old Le Mans cars) and charges a fairly resonable rate. The 'specialist' garages that send him the cars to be painted then upsell the cost of painting these cars to their customers for all the aggro of delivering the car to the paintshop. I also know of a few VW restorers who undertake Porsche work as well, just as good quality work but at a fraction of the cost. I think people get too hung up on using a 'specialist' company with the silly price tags that go with them. I've seen work from some of these specialist garages and it's not as good quality work as the price tag might suggest.DonkeyApple said:
Right thought at the wrong time. Buy markets like classic cars won't have govt interference to stimulate a boom or to artificially maintain a bubble.
In a more pure and non political market where you don't have state interference it's more obvious.
The current bubble for cars will burst either when a fiscal event triggers the need for a large number of owners to sell (in the late 80s in the UK the bankrupting of 30,000 wealthy Lloyds Names was such a trigger event that helped sign post the bursting of the bubble. Those 30,000 had bought terrific numbers of classic cars for both personal and CGT purposes and suddenly had to sell them);
Or the bubble will burst when other asset classes suddenly become more rewarding. What will happen there is that the super wealthy who have a large collection will be advised to release a number of vehicles to auction and redistribute the proceeds into a different section of the portfolio. This will be fine for a while but slowly the professional market will begin to note this effect and then suddenly you'll have a series of sales failing at auction and the information becomes public. Others then think they should cash out and supply openly increases but at the same time demand contracts as the savvy buyers are now on the sales side of the book. Finally, you are left with the chap who may have around £1m in savings and put half of that into his dream car, an F40 while using the other cash to invest elsewhere. He has a sudden liquidity squeeze then sees the value of his primary asset falling at each auction and he eventually capitulates as he needs cash and dumps his £500k car for £150k defining the new low of the market.
Savvy buyers will then appear and knowing that the population is ever growing so demand for old cars will grow and knowing that supply is low and fixed on old cars will start buying them up. A few years later the general market will have woken up to the rises and start buying again. Towards the end you will see people chucking their life savings in, mad auction prices, articles saying it will go on forever, people setting up investment funds that make the asset liable for CGT thus undoing the exact reason why some of the rises exist and minicab drivers telling you to buy old SLs.
But, the bubble should have burst in 2007 with the financial crisis and indeed prices wobbled as some forced sellers appeared but the geopolitical events of Govts hiking taxes on the wealthy, devaluing cash by printing, fear of holding cash due to bank default risk, the fear of rampant inflation and the desire to hold transportable wealth or the need to 'clean' untaxed money has forced demand and so prices sky high.
Classic cars will always go up in value. There are a fixed number of cars and an ever growing number of buyers plus cash will always devalue due to inflation. But never in a straight line. It's a market that is no different from any other.
Very interesting comment sir.In a more pure and non political market where you don't have state interference it's more obvious.
The current bubble for cars will burst either when a fiscal event triggers the need for a large number of owners to sell (in the late 80s in the UK the bankrupting of 30,000 wealthy Lloyds Names was such a trigger event that helped sign post the bursting of the bubble. Those 30,000 had bought terrific numbers of classic cars for both personal and CGT purposes and suddenly had to sell them);
Or the bubble will burst when other asset classes suddenly become more rewarding. What will happen there is that the super wealthy who have a large collection will be advised to release a number of vehicles to auction and redistribute the proceeds into a different section of the portfolio. This will be fine for a while but slowly the professional market will begin to note this effect and then suddenly you'll have a series of sales failing at auction and the information becomes public. Others then think they should cash out and supply openly increases but at the same time demand contracts as the savvy buyers are now on the sales side of the book. Finally, you are left with the chap who may have around £1m in savings and put half of that into his dream car, an F40 while using the other cash to invest elsewhere. He has a sudden liquidity squeeze then sees the value of his primary asset falling at each auction and he eventually capitulates as he needs cash and dumps his £500k car for £150k defining the new low of the market.
Savvy buyers will then appear and knowing that the population is ever growing so demand for old cars will grow and knowing that supply is low and fixed on old cars will start buying them up. A few years later the general market will have woken up to the rises and start buying again. Towards the end you will see people chucking their life savings in, mad auction prices, articles saying it will go on forever, people setting up investment funds that make the asset liable for CGT thus undoing the exact reason why some of the rises exist and minicab drivers telling you to buy old SLs.
But, the bubble should have burst in 2007 with the financial crisis and indeed prices wobbled as some forced sellers appeared but the geopolitical events of Govts hiking taxes on the wealthy, devaluing cash by printing, fear of holding cash due to bank default risk, the fear of rampant inflation and the desire to hold transportable wealth or the need to 'clean' untaxed money has forced demand and so prices sky high.
Classic cars will always go up in value. There are a fixed number of cars and an ever growing number of buyers plus cash will always devalue due to inflation. But never in a straight line. It's a market that is no different from any other.
I largely agree - I think classics are certainly on the up, especially as Chris pointed out in the original article - with interest from the emerging markets. What we don't have is clear, empirical evidence (although it may exist) to prove that this is the case; but whoever let facts get in the way of a speculative market?
I've a thing for front-engined Pork, and been watching prices and sales since about 2005/6. What we see is a slow rise, starting in the last year or so, of stories of exports - although Australia and Continental Europe seem to be common destinations, rather than the emerging markets.
TobesH said:
Back in 2002 I bought a new Boxster S @ £42,000!
At the time I toyed with the idea of a Golf GTI @ £16,000 and a 964RS German Import @ £ 25,000.
A 964RS is now upwards of £ 50,000 or nearer £ 100,000 for the cream.
Foresight and all that...
Yes....I very nearly bought a 2.7 RS in 2002 for £55k from Autfarm who were selling it on behalf of someone...they thought it was a bit toppy though so I didn't buy it. Ho hum.At the time I toyed with the idea of a Golf GTI @ £16,000 and a 964RS German Import @ £ 25,000.
A 964RS is now upwards of £ 50,000 or nearer £ 100,000 for the cream.
Foresight and all that...
A mate of mine did buy a Muira in 2003. Paid £55k.........dealer had been trying to sell it for £70k for months and he bought it at auction. As Chris said in the article I actually think they are "cheap" at £400k relative to other cars....universally recognised as a truly iconic design, the first of it's genre and very rare. If I was buying into the classic car market that's where my money would go.
sleep envy said:
Madness. What goes up etc.Gassing Station | General Gassing | Top of Page | What's New | My Stuff