Liv-ex was recently asked a number of questions by a journalist on the effect of the credit crunch/crisis on the fine wine market. We thought we'd share our responses with our blog readers as well.
Has the market for fine wine been affected by the credit crisis?
The fine market has been affected by the credit crisis, although to lesser extent than equities or commodities. Wine merchants and brokers are clearly worried that a global downturn will effect demand for the top wines and have adjusted prices accordingly. According to the Liv-ex 100 Fine Wine Index – which tracks the values of 100 of the world’s most sought after fine wines – prices fell 4% in September. However, the index is still up 5.5% in the year to date and is up 4.4% year on year.
How has the Liv-ex 100 reacted since the start of the crisis?
When the credit crisis first started unfolding in September last year the Liv-ex 100 Fine Wine Index started to drop. Market confidence returned in the New Year, however, with the index setting a new record high in June 08. Since then the market has started to edge lower, with these falls accelerating in September as the true damage caused to the global financial markets became clear. (Download the full series).
Do you expect the credit crisis to have a lasting effect on the wine market?
The credit crisis, and its effect on the wider economy, will certainly have an impact on the wine market in the medium terms and prices are likely to remain soft into 2009. There have been previous periods of price deflation for fine wines, such as during the recession of the early 70's and following the Asian crisis of the late 90s, but the market has always recovered strongly. Indeed, top Bordeaux wines have increased, on average, by 10% a year over the past 50 years. There is nothing to suggest this pattern won’t continue.
Should people buy or rather sell their bottles right now? Is this the time for bargain hunters?
There are certainly some excellent buying opportunities available at the moment, although whether prices still have further to fall is open to argument. The best way to keep on top of market moves is to subscribe to a Liv-ex Cellar Watch package, giving access to real time trade prices and also enabling collectors to track the value of the contents of their cellar.