I was flying to Rome from London on British Airways on Friday and I read an interesting story on the art auction market in the current issue of the Economist – and it made me think about the wine auction market.
The headline to the short story was “The Art Market: Signs of Weakness," with a subhead that read, "Stellar art-auction results in New York do not tell the full story.” The article went on to point out that despite some amazing sales of individual paintings such as a Francis Bacon triptych for $83.6 million and a Lucian Freud portrait for $33.6 million, the base the of art market is softening. About one-third of the artworks being sold at auction are now going for at or below the lowest estimated price. Sotheby’s had a first quarter loss of $12.4 million, and an investment bank recently downgraded the auction house’s shares.
I wonder when, if ever, the same will happen in the wine auction market? I am sure that you have looked in awe at some of the prices recently paid for bottles in wine auctions. It’s sometimes hard to believe that bottles of legendary wines such as 1978 Domaine de la Romanée Conti, 1961 Jaboulet Hermitage La Chapelle or 1947 Cheval-Blanc can trade for the price of an American-made SUV. But it happens all the time, and I don’t begrudge people with money who want to own, and, with hope, want to drink these wines. If they want to pay these high prices, more power to them. Plus, I have been lucky to drink many of these rareified bottles, and they can be mindblowing.
But I have to wonder what is going to happen to the core business of wine auctions, where a good amount is purchased for investment. Most of the first growth 1982 Bordeaux are trading for at least $2,000 a bottle, worth many times their prices just a few years ago. The top 1990s and 1989s are following. But there are signs of price softening in the market, according to some wine brokers I have spoken to.
The top 2005s might go a little soft, some say. I was at a massive tasting in London yesterday of La Mission Haut-Brion back to 1929, and I heard that the 2005 is trading for three to four times the price of the excellent and delicious 1988 and 1978. It doesn’t make much sense, if you are interested in drinking great claret. But a lot of the high-end 2005s have been bought for investment.
The credit crunch and fears of recession surely must have some sort of impact on fine wine auctions, and fine wine prices at large. Prices may soon flatten or decrease, although I could be wrong. As some first-growth owners have told me, there are many more people in the world who want to buy more top first-growth Bordeaux than has been produced in great years such as 2005, 2000, 1990, 1989, or 1982. This seems true, especially with all the new wealth in places like Russia, China and India.
I don’t have the answer, but what I do know is that wine investors and collectors have an option that their colleagues in the art world don’t if prices go down significantly – they can always open and drink their precious bottles.
Claude Pope — Raleigh, NC — May 19, 2008 4:22pm ET
Sandy Fitzgerald — Centennial, CO — May 19, 2008 5:14pm ET
Lisa Ruyter — Vienna Austria — May 20, 2008 7:04am ET
James Suckling — — May 20, 2008 9:59am ET
Sips & Tips | Wine & Healthy Living
Video Theater | Collecting & Auctions