Ironically because wine has been a good, stable performer, a lot of people have been choosing to sell from their collections rather than selling their shares, which has depressed prices. Of course, this means fine wine has never been such excellent value. So, if you are cash rich, it's a perfect time to be buying.
The emotion should never be lost when buying wine. Ideally the fallback position should be that if the wine doesn't achieve the growth in price you hoped for, you’ve still got a cellar of amazing wine to drink. If you adopt that psychology to investing in fine wines, then you can't lose.
The tax implications of tipple
If you’re thinking of getting your collection valued, Harrow notes that there is no simple algorithm to doing so – it requires gathering accurate pictures of cellar worth or engaging a specialist to do the legwork for you.
While the primary market is wine being sold directly to the consumer, the secondary market is where the owner sells the wine to make a return on investment. Harrow recommends keeping wine in bonded warehouses in this instance.
Wine kept in ‘bonded storage’ – a special facility which is considered offshore – is not subject to Duty. While your wine is stored in an HMRC approved warehouse, there is also no payable VAT until it is removed from bond or delivered to your home.
Harrow says the advantages of bond storage go beyond tax breaks, however, adding: “Investors are almost always better off keeping wines in a bonded warehouse rather than having them at home. Not only is it more tax efficient, but you have a paper trail to prove the wine has been stored in optimum conditions – something that is hard to do yourself - making it easier if you want to sell it on the secondary markets.”
Changing flavours and regions
Wine grapes are especially sensitive to changing temperatures and after the record-breaking temperatures of 2022, France’s vintners endured a particularly difficult year as grapes withered on the vine.
Looking further ahead, should the world temperatures increase by two degrees Celsius, scientists predict that the regions suitable for growing wine grapes could shrink by as much as 56 per cent.6
Harrow explains that while climate change is undoubtedly creating severe challenges for established wine producers in southern Europe, it is creating opportunities for the continent’s more northern countries including the UK and Germany.
“They will still make wine in southern Europe, but it might not be from the grapes they use now, and it won't taste the same. Warmer temperatures in the UK mean English sparkling wine is no longer a novelty; it absolutely goes toe to toe with the very best Champagne. Similarly, Germany is producing some amazing pinot noir, that is beginning to challenge Burgundy.”
Building a valuable wine collection is as much about fulfilling personal taste as it can be about adding to portfolio returns, and in the current markets there are ample opportunities to satisfy both objectives.
If you want to learn more about how to manage your portfolio, please speak with your Relationship Manager or connect with us.
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