_Art leads Knight Frank’s Luxury Investment Index with prices rising 11% in 2023

Andrew Shirley, Editor of the Knight Frank Luxury Investment Index said, “In 2023, the major auction houses achieved a string of record-breaking sales. It sounds like a bumper year for luxury investments, however the KFLII reveals a less positive picture. KFLII edged into negative year-end territory in 2023, albeit by a fraction of a percent, as several stalwart members of the index dropped into the red or showed minimal gains.” 

Art was the only one of Knight Frank’s 10 index constituents to hit double-digit growth in 2023, but all of the gains came in the first half of the year with values sliding significantly later on, according to AMR’s All-Art Index. The ultra-contemporary sector experienced the biggest contraction, indicating an oversaturation of fresh paint artists without notable standouts. 

Jewellery (8%), watches (5%), coins (4%) and colour diamonds (2%) make up the top-five best-performing assets with rare whisky bottles (-9%) the worst performer in the index. 

Jewellery had a strong performance, with 8% annual growth. Sebastian Duthy of AMR, which supplies data for a number of the asset classes tracked in the KFLII, said that the demand for exceptional quality colour gemstones, iconic signed period jewels, and items with historic provenance stood out. It is important not to underestimate the influence of hip-hop culture on the market, exemplified by the impact of younger collectors, shouldn't be underestimated. A notable example is Drake’s purchase of Tupac Shakur's gold ruby and diamond crown ring for $1 million. 

Watch prices, tracked by KFLII, surprisingly rose by 5%, taking third place in luxury rankings. Auction sales at the big three auction houses reached £488 million in 2023, and the total value of these high-end independent watchmakers such as Philippe Dufour, Roger Smith watches reached £42 million, a 40% increase from the previous year. 

Rare whisky bottles (-9%) emerged as the worst performer in the index. However, despite the worst performing 50 bottles lost 26% of their combined value, the remaining 50 bottles gained 5%, with the 20 best performers increasing by a respectable 20%, explained Andy Simpson of Simpson Reserved. 

Classic cars came in just above whisky as the second worst-performing asset class in the index, decreasing in value by 6% over 2023. Classic car expert Dietrich Hatlapa commented, “The value of the HAGI Top Index was up 22% in 2022, so a retreat of 6% isn’t all that bad.  However, we have seen some marques like BMW (+9%) and Lamborghini (+18%), which appeal to a younger breed of collector, buck the trend in 2023.” 

In the context of Hong Kong, the luxury asset landscape reflects the global trend, with art and watches claiming the top two positions as the most popular investments of passion. The primary motivation behind these investments is the pleasure of ownership. Notably, clients in Hong Kong allocate 19% of their investment portfolio to luxury investments, a figure that aligns with the global average. 

Hong Kong has witnessed a remarkable surge in art investment and plays a pivotal role in the growth of the global art market, as evidenced by the overwhelming responses and robust sales witnessed during art fairs like Art Basel Hong Kong and international art auctions. This growing interest in art spans across Asia, with an increasing number of affluent individuals recognising art as an alternative investment in Hong Kong. We expect the demand for fine art especially blue-chip art, to continue growing in 2024 among collectors and investors, said Ho-Pin Tung, Director and Head of Private Office, Knight Frank Hong Kong.

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