Clas­sic cars: Mark Hay­bit­tle Re­turns of 48%

In­vestors who think out­side the square can achieve spec­tac­u­lar re­turns

Money Magazine Australia - - CONTENTS - STORY MARK HAY­BIT­TLE

In a world where re­al­is­ing ma­jor re­turns from an in­vest­ment is be­com­ing in­creas­ingly dif­fi­cult, we went hunt­ing for some­thing that would make us the re­turns of years gone by. We an­a­lysed all the in­for­ma­tion avail­able to us to see ex­actly what had passed, what ex­isted and what was com­ing in the world of in­vest­ment. We dis­cov­ered sev­eral as­set classes that have been over­looked while most plan­ners and ad­vis­ers pur­sue so-called safe in­vest­ments. We then looked at what was in front of us, in par­tic­u­lar what these “safe” in­vest­ments were do­ing, and rapidly came to the con­clu­sion that in these days of global un­cer­tainty the tra­di­tional as­set cars were trail­ing the field.

We sum­marised the re­sults: cash 3%, Aus­tralian shares 5.5%, res­i­den­tial in­vest­ment prop­erty 8% (ASX Rus­sell Re­port 2016 gross re­turns); clas­sic cars 48%pa (KFLII).

The con­clu­sion led us into the world of clas­sic car in­vest­ing, an as­set class where many in­vest­ments dou­ble in value in a year, with some achiev­ing even greater re­sults.

Clearly spe­cial­ist knowl­edge was re­quired to make this work, which was fine in our case, as we had grown up with these cars, built them, bought them, sold them and raced them. As a new in­vest­ment class, it was there­fore a no-brainer for us.

Look­ing around, we found that Euro­peans are into clas­sic cars in a huge way, with 36 main­stream tele­vi­sion shows on the sub­ject and eight weekly mag­a­zines that have over 80 fresh pages ev­ery time. As we rapidly came to re­alise, these cars can rise in value astro­nom­i­cally.

There are many ways to value the in­vest­ment per­for­mance of clas­sic cars, in­clud­ing the Knight Frank lux­ury in­vest­ment in­dex (KFLII), which tracks the per­for­mance of 10 “in­vest­ments of pas­sion” around the world. There are also many on­line ar­ti­cles from this in­sti­tu­tion, and most of them con­clude that the ap­pre­ci­a­tion in the clas­sic cars mar­ket is between 47.6% and 49.6%pa.

An­other way to mea­sure per­for­mance is the Hagerty clas­sic car valu­a­tion tool (also known as the HAGI). Pro­duced by Hagerty, it plots the growth in clas­sic car val­ues by group (such as Euro­pean clas­sics, Amer­i­can clas­sics) as well as by make and model.

Bloomberg re­ports Jonathan Klinger from Hagerty as say­ing: “Five years ago, you and I should have taken all of our liq­uid as­sets com­bined and pur­chased ev­ery 308 we could get our hands on to sell to­day.” He was re­fer­ring to just one of the great ris­ers in the clas­sic car mar­ket, the Fer­rari 308 GTB. He pointed out that the cur­rent av­er­age 2015 price across the 308 range was $US71,000 ($93,000), which is up 190% since 2011, ac­cord­ing to Hagerty data.

The clas­sic car in­dus­try has been given a boost by the baby boomers, who have cash to spend and want to own and drive the cars that they had dreamed of as kids. They favoured 1960s and ’70s Porsches, Fer­raris and Jaguars, and so up went the prices as avail­abil­ity de­creased.

In Aus­tralia clas­sic cars were orig­i­nally con­fined to Hold­ens and Fords, the only two man­u­fac­tur­ers for many years, un­til Toy­ota and Mit­subishi opened as­sem­bly plants. Through­out the 1950s, 1960s and 1970s Holden and Ford re­ally had no ma­jor com­pe­ti­tion, and so “spe­cial” ver­sions were thin on the ground. There are a cou­ple of no­table ex­cep­tions, in­clud­ing the Holden HK Monaro, which has be­come highly valu­able. An­other ex­am­ple is the Ford Fal­con GTHO Phase 3, which could achieve in ex­cess of $700,000 not so long ago. These cars have now dropped in value con­sid­er­ably, as they only ap­peal to a per­cent­age of the 22 mil­lion peo­ple who live here, whereas the Euro­pean clas­sics ap­peal to the en­tire world. The Ford Fal­con GTHO Phase 3 was built in lim­ited num­bers, and had great per­for­mance and good han­dling, and so has some of the hall­marks of a true clas­sic.

In later years the Aus­tralian mar­ket widened greatly, and so peo­ple started buy­ing or im­port­ing cars from Europe, Ja­pan and the US, as in­ter­est grew rapidly.

The real ris­ers in Aus­tralia over the past 12 months have been Porsche 930 tur­bos, Porsche 911 SCs, Jaguar E-Types as well as the Fer­rari 308 GTBs, which have at least tripled in value. We would have orig­i­nally said that these cars were at the end of their growth cy­cle but they all then rose by an av­er­age of 18.4% in June-July, and so clearly de­mand is still strong.

Mark Hay­bit­tle is co-founder of Su­per­carSe­crets, with Shirley Ed­wards-Lang­ford. They help peo­ple pur­chase clas­sic cars with po­ten­tial for growth. su­per­carse­

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