THE RISE AND RISE OF CLASSICS AND COLLECTIBLES
THE MILLION-DOLLAR BARRIER HAS BEEN BUSTED FOR A USED AUSSIE CAR, BUT AS PEOPLE PAY RECORD AMOUNTS FOR COLLECTIBLES AND CLASSICS, IS THE MARKET RUNNING ON EMPTY?
How Covid sent used values soaring... and why it’s not too late to get in on the action. Check out our top 10 sleepers
IMAGINE PARENTS IN the 1970s, ’80s or ’90s saying to their kids, “Secure your future, children – get yourself a Falcon GT-HO!” Yet can something that posts a 14-second quarter mile really post a financial return, too? A seemingly laughable proposition is now, decades later, a serious approach taken by investors looking to build their wealth as they diversify from more traditional investments including property, shares and even gold. Buying a piece of automotive history has delivered some owners serious profits, while there’s still a strong number of buyers willing to pay serious money as record auction results, clearance rates and prices continue to rise. How did we get to people paying more than a million dollars for Holdens and Fords, and when will it stop?
The rising economy of the last decade has seen classic and collectible cars increase in value, but there’s more elements that have created a ‘perfect storm’ of high values. Put simply, it’s as plain as supply and demand, and in Australia, that has been fuelled by nostalgia as local manufacturing ended for Holden, HSV and Ford.
“Investment grade cars are getting the record prices, so when you look at what people are buying and who’s buying the cars, they’re obviously high-wealth individuals, and they’re looking at these cars as another portfolio of investments for their super fund,” explains Steve Waterman from Slattery Auctions, where a record was set when a GT-HO Phase III was sold for a record $1.15 million only weeks after an HSV GTS-R W1 Maloo sold at Lloyd’s for $1.05 million. “What we did see out of this auction was the sheer volume of high wealth individuals that were chasing these cars. It was quite extraordinary; it was almost like price wasn’t an issue – I want that car.”
While prices were already strong, the global pandemic has had an even greater impact on car markets around the world than even the Global Financial Crisis – and it wasn’t only classics that saw prices jump.
Prices actually fell before they rose, as used car prices dropped 16 percent in April 2020 from the average price in Q1 2020. “We had dealers that did everything they could to move stock, as they didn’t want to be stuck with the cars as values were falling,” explains Dorian Lapthorne of Deloitte, the largest auto market data company in Australia.
Factory shutdowns by major car makers reduced supply, while lockdowns saw public transport, taxis and ride-sharing abandoned, rapidly driving up demand for private vehicles. The lack of new vehicles meant that buyers switched to used vehicles; prices continued to rise, and the ‘COVID tax’ was born as they competed for limited stock.
“One of the unexpected consequences of people being tied to their homes for long periods, was that some people were actually saving money – sure, there were people doing it tough, but others were finding that they had a bit more money in their pockets. For some, it might have been because they were saving on everyday items – spending less on parking, tolls, train fares, eating out – but we also now realise that many people saved money during this time because they could not travel for their holidays,” says Lapthorne.
A lack of international travel also pushed people towards domestic travel, and further pressure on prices not only of used cars, but anything needed for a local sojourn.
“We’re seeing all leisure assets as going up in price, and that includes caravans and four-wheel-drives, jet-skis, boats and things like that,” says Steve Waterman from Slattery Auctions. “There’s just a strong demand for leisure assets at the moment as people seem to have a lot more time on their hands, and spending time at home.”
That time online and ‘spare’ holiday funding has also found its way into classic cars for several reasons. At a basic level, a classic car can still be worked on during a lockdown, while collecting your groceries in your Bugatti is perfectly legal – and an anecdote to the chaos of the rest of the world in 2020.
The economic volatility meant that many investors were looking for alternatives to traditional channels. “From an investment point-of-view, that bank interest rates are basically zero, the share market volatile, and finding value in the property market is a bit questionable as well,” says Waterman. “That’s when we started seeing record numbers of high grade collectible cars around the globe.”
As early as July 2020, a 1965 Shelby Mustang Prototype sold for US$3.85million at Mecum Auctions Indianapolis – a world record for a Mustang. The prices came despite the cancellation of live-bidding events and the growth of online auctions globally – both in terms of sales and frequency. In October 2020, Grays Online sold a dilapidated Phase III GT-HO that had been reportedly ‘attacked with an axe’ for $400,000. Sold as a rolling chassis, it didn’t have an engine….
“The UK is recording record classic car prices as well – they’re seeing unbelievable prices paid for the rare Ferraris and Porsches and E-Type Jaguars,” says Waterman.
Is this a COVID-driven bubble, or just a fork in the road? “Unfortunately, everyone thinks their XY Falcon is worth $1 million,” says Waterman. “Sorry, that’s not the case. These investors are quite astute in terms of what they’re chasing, and they’re recognising anything that is a rarity of limited numbers – cars built in limited numbers and no longer made – this is where they’re choosing to put their money, and these cars’ values may bounce around a bit, but long-term will continue to hold their value.” Get in line, kids.
“We also now realise that many people saved money during this time because they could not travel for their holidays”