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Downward slide in fine wine prices halts, says Wine Asset Managers

Published:  02 December, 2014

The downward slide in fine wine trading has halted with flat prices for the three months since July 2014, but a change in perception has made consumers once ready to cough up £14,000 for Lafite 2008 now reluctant to part with £5,000.

The downward slide in fine wine trading has halted with flat sales for the three months since July 2014, but a change in perception has made consumers once ready to cough up £14,000 for Lafite 2008 now reluctant to part with £5,000.

That's according to Wine Asset Managers, whose most recent report shows the unit price to be flat (-0.1%) since October. "While the last three months has given welcome succour from the previous weakness, we still await proper signals that the recovery is on its way," it states.

Meanwhile the Liv-ex 100 is up 1% over the last three months, with the Liv-ex 50 flat for the same period. Wine Asset Managers analysis says that while bid to offer ratio is a bit lower in October than it was in September, at 0.45x, and average spread has narrowed from 18 to 16%, "we are in a better place than we were in early summer". However trade in first growths remains "laboured" and sentiment needs to turn.

Liv-ex investables index rolling 5-yr CAGRLiv-ex investables index rolling 5-yr CAGR

If decade-long market cycles hold true, we should be approaching the beginning of the next cycle, the report states.

But a change in perception is required to get customers spending again on top wines, the report states.

Average first growth falls since 2011 peakAverage first growth falls since 2011 peak

"People were tripping over themselves to buy Lafite 2008 at £14,000 in early 2011, and now merchants are having trouble tempting buyers at £5,000. Lafite across all vintages we follow has fallen by an average of 50%, with some vintages falling as much as 65%."

As for the other four first growths, these have fallen by around 35% but in a more uniform manner, meaning that the average across all five first growths measured is down by 40%.

"A change in perception and sentiment is what made punters happy to buy at X but unhappy to buy at X minus 40%, and much of that was based on demand from China," the report says.

It also forecasts a "bumpy ride" given low relative liquidity is one of the reasons for owning fine wine as an investment. "The mid-1970s was the last time an extended depression in prices took place, which was followed by a much longer and less frantic upturn," it states. 

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