A favourable forex rate (for those buying outside the UK), low interest rates, and the uncertainty of geopolitical change have all served to fuel demand for passion investments such as whisky, wine and art as a viable component of a balanced investment portfolio
The booming UK rare whisky auction market has become ‘increasingly liquid’ in an exceptional year for rare Scotch, according to a new report published by Dunfermline-based whisky analyst, broker and investment expert Rare Whisky 101.
According to the full year results for 2016 published, both the volume and value of rare Scotch whisky sold at auction increased by record amounts. The £ value of collectable bottles of Single Malt Scotch whisky sold at auction in the UK rose by 48.64% to a record £14.21m (2015 £9.56m). The number of bottles of Single Malt Scotch whisky sold at auction in the UK increased by 35.21% to 58,758 (2015 43,458).
The most expensive bottle to sell at auction in the UK was a bottle of 50 year old Yamazaki for £62,600.
According to the report, there are a number of factors behind this increased liquidity, created by the impact of volatile market conditions. A favourable forex rate (for those buying outside the UK), low interest rates, and the uncertainty of geopolitical change have all served to fuel demand for passion investments such as whisky, wine and art as a viable component of a balanced investment portfolio.
The past year has also seen the continued growth of the whisky auction market with more players coming to market, making the process of buying and selling more accessible to investors and collectors. In turn, the trading costs associated with selling rare whisky are reducing as some auctioneers compete for the opportunity to attract the most sought after bottles by reducing commission rates.
However, while Rare Whisky 101 sees further room for growth in 2017, they also predict a stabilisation in the market with certain brands predicted to re-trace to more affordable levels.
Whisky investment analyst and co-founder of Rare Whisky 101, Andy Simpson said: “2016 has been another exceptional year for rare Scotch and we’re beginning to see signs of maturity within the market. The continued growth in both volume and value has added further liquidity, making rare whisky a more popular and more accessible ‘passion investment’. At the same time, the dynamic evolution of the online rare whisky auction market has made it much easier to buy and sell.
“We have no doubt that the current low interest rate environment and wider uncertainty within the market has fuelled demand for rare whisky, as investors have looked to alternative ‘passion’ investments which can offer a diversified approach to balance their portfolios and deliver positive financial returns.
“While it’s difficult to see the market continuing to expand at such levels over the next few years, primarily due to a finite availability of rare whisky, we do believe that there is further room for growth. As increasing numbers of investors participate in the market and demand continues to increase, it will be fascinating to see how prices move.”
Scotch achieves recognition as passion investment
In another booming year for rare whisky, the leading index for Scotch whisky, the Rare Whisky Apex 1000 Index closed 2016 up 38% for the year, outperforming strong years for Wine (Liv-Ex 24.79%), Gold (8.46%) and the FTSE 100 (12%).
As a clear sign of rare whisky’s growing popularity among passion investors, Lloyds Private Banking recently listed whisky as one of the UK’s favourite passion investments. According to Lloyds’ research, one in six UK investors holds alternative investments in their portfolios, with 3% investing in whisky. On average, £27,700 is spent on whisky as a single “passion” investment.
The auction market is changing the retail dynamic of the whisky industry
In line with the steep increases in both volume and value, 2016 also witnessed the evolution of the secondary (auction) market as a route to market for distilleries. For the first time, traditional retail routes were overlooked in favour of auction for primary market releases.
One such example is Strathearn Distillery which sold its first 100 bottles of Scotch through Perth-based Whisky Auctioneer, earning them between £315 and £4,150 per 50cl bottle of 3 year old Scotch.
The Macallan still The Number 1
Macallan maintained its dominance as the number one traded distillery on a volume and value basis, accounting for nearly 10% of the market for all bottles sold and 22% of the total value. The next closest distillery from a volume and value perspective is Ardbeg, with an 8% share of both volume and value. For the Macallan’s market defining 18 year old vintage collection 1965 – 1990, prices shot up from £19,000 at end 2015 to £46,000 at end 2016. Demand for old, rare, vintage and peerless quality single malt whisky has never been greater.