HEARTLAND UK CLASSICS PRICE SURGE
Auction house says affordable classics are soaring in value – helped by continuing low interest rates
The values of sub-£100,000 classic cars continue to buck market expectations by forging upwards. The big risers, says Silverstone Auctions, are in the mainstream and modern sectors, as buyers turn to them as a way of making up for low returns on traditional investments. This comes in the week when a Peugeot 205 GTI is auctioned for £30,000.
Not everyone wants to see serious investors continuing to show too much interest in classics.
CCW’s markets editor Richard Barnett says: ‘The view from my desk is that investors might look to put their money somewhere else – property, art, jewellery, as I have an inkling they see the old car market as passé. And if they do, good!’
‘The sub-£100k bracket continues to perform well, with modern classics seeing the largest area of growth’ WILL SMITH, SILVERSTONE AUCTIONS
The workaday classic car market is going from strength to strength despite ongoing worries about the UK economy. And the latest drop in interest rates is set to continue benefitting the classic market.
The cut in the UK base rate from 0.5% to 0.25% by the Bank of England last week continues a period of record lows. The first move to superlow interest rates came as a consequence of the global banking crisis in 2008 – and this was partially responsible for the boom in classic car investments then. The base rate could drop again if the UK’s prospects don’t improve in the coming months – following Britain’s vote to leave the EU.
Bank of England governor, Mark Carney, has asssured borrowers that lower interest rates must be passed down by commercial banks. This will hit returns from savings, making classic cars an increasingly attractive buy. After announcing the cut, Carney said lenders had ‘no excuse’ not to pass the rates on. He warned that ‘returns are very low and they’re likely to be low for some time’.
Experts in the classic market are claiming that these low returns will boost classic car sales as people look to put their money elsewhere – with the greatest growth anticipated in cars worth less than £100,000. The modern classics market is showing impressive growth, with values of the most desirable cars from the 1970s-1990s doubling – and more – between 2010 and 2016. Even since 2014, growth has been impressive (see chart), and there’s little sign of this slowing.
‘The modern classics market is storming ahead right now,’ says CCW and Modern Classics editor Keith Adams. ‘Auction houses and dealers are switching on to the appeal of modern classics, tapping a rich seam of demand which has been building over the past 10 years or so. With more sales now focusing purely on modern classics, buyers have a real focal point.’
Silverstone Auctions’ latest sale shows signs of this. It made a total sell-through of £4.9m on 28-31 July – a strong performance after a slew of slow sales immediately post-Brexit. The thirst for modern classics was backed up by a Peugeot 205 GTI achieving a new record auction price of £30,938, more than £12k above its lower estimate.
Silverstone Auctions sales manager Will Smith says: ‘ With poor returns in traditional investor markets, tangible assets and classic cars should perform well, as we saw during the sub-prime crisis in 2008/2009. The market has seen a sensible self-correction at the top end during the last 18 months and this should satisfy investors that cars are a safe place to invest. The sub£100,000 bracket continues to perform well with modern classics seeing the largest area of growth.’
Not everyone wants to see serious investors showing too much interest in classics. CCW markets editor Richard Barnett says: ‘The view from my desk is that investors might look to put their money somewhere else – property, art, jewellery, as I have an inkling they see the old car market as passé. And if they do, good!’
Auction expert Richard Hudson Evans warns owners that this isn’t the only rate-cut drawback. ‘One immediate knock-on effect is the fall in value of the pound. With it going down, the value of your classic cars become less. Another problem will become the price of parts. As the pound weakens, buying imported parts and services from the USA, Japan, and Europe will become more expensive.’
Keith Adams adds: ‘A final potential spoiler for the growth of classic car values could be the imposition of Capital Gains Tax on cars. You’d expect a new government to be looking at this potentially valuable area.’