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Tuesday, 31 January 2012

crazy hammer prices. Trend or speculation?

Yesterday, I retweeted a report from a wealth manager interviewed by Classic And Sports Car, who was sharing some thoughts on classic cars investment returns. I was happy to have a general confirmation of the opinion I summarised in an earlier post in this blog (in Italian), where I was saying that truly rare & expensive cars are definitely becoming less and less accessible due to the globalisation on the market, a totally new access to information on available cars, the presence of more and more professional traders and brokers, and the obvious lack items to be traded, due to the mere fact that production of goods classified as classic cars stopped years ago. At the same time, recurring peaks in classic cars evaluations can be seen especially - or only - when it comes to multi-million item for sale. Average car are still average, increasing value is often to be reconciled against a number of factors, including the cost to keep the car and its value in good shape. Most of the increasing evaluation of classic cars are de facto imposed by the leading auctioneers, who are always able to find incredible examples of fine motor cars to be sold (eg, last but not least, the stunning 250 GTO going on sale at Amelia Island) and find the right set of interested bidders. This trend is called, in one word, speculation, and it is a well known phenomenon in several fields, and heavily regulated on all the markets where huge capitals can be exchanged, but in the Classic Car one. I am a liberal, and I agree that market makes the price, but we need to talk about these trends critically, avoiding to think about them as the result of fancy hobbies of rich people.

Generally speaking, When hundreds of thousands of Pounds get exchanged, Authorities should have a say; potentially, the market should be regulated to avoid speculation; even more than that: I am sure that all the Auctioneers take trading extremely seriously, and in most Countries are heavily regulated, but the risk of infiltration is there. I know that in most cases there are severe anti-money laundering regulations preventing uncontrolled cash flow in the so called "High Value Deals" world. Is that enough? Still, regulation is not only worth to prevent criminality, but also to impose or reinstate the delicate equilibrium between offer and demand, when that's lost. And in these days, we are exactly seeing that. That being said, I appreciate there are a number of arguments that can be brought against the idea of regulating classic cars market, the first being that most of the trades still take place on a C2C basis, and private sales cannot be easily monitored.

Let me quote here an abstract from Classic and Sports Car that -sort of- shocked me, just as a matter of example.

As reported in the article I linked above, "A 1955 Aston Martin DB2/4 drop-head coupe bought at auction in 2003 for £58,700 made £227,000 when it came under the hammer again in at Bonhams in May 2011; a return of 287%. The same car had also traded in September 2009 for £181,900; its £227,000 realisation in May 2011 represents a 25% price advance in well under two years".

Isn't this insane? Can a high-value classic car estimation be floating so much? What is the real reason influencing the price? conditions, number of owners, history, or something else, like the mere network of a bidder, making him capable to buy the car with a precise re-selling plan? please shout your opinion, dear followers!

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