Values & Volatility: How does property compare with other asset classes?

The overall value of Knight Frank’s Luxury Investment Index rose by just 5% in the 12 months to the end of March, the lowest annual increase recorded since the beginning of 2010.

The index, which tracks the performance of a whole range of luxury assets, sees classic cars retain pole position – despite a recent deceleration – after an 17% annual surge. Fine wine takes second spot, following growth of 9%, ahead of rare coins, which are up by 6%.

Art and furniture were the biggest losers, dropping by 5% and 6% respectively.

Interestingly for us, the research compares the volatility of these luxury collectables with other asset classes, including PCL property. Gold has seen the biggest ups and downs over the last decade (20% volatility), followed by the FTSE, cars and stamps, while PCL sits right in the middle of the pack with around 5%…

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Carter Jonas also tracks the performance of property against other asset classes, but uses a notional country estate rather than PCL.

The 3,168-acre “Model Estate” is set within the M4, M40, and M5 triangle and involves: a Grade II-listed manor house, farmhouse, six let farms with 1,549 acres of arable; in-hand farms with 1,073 acres of arable; three further farmhouses, four cottages, 14 commercial properties, and “other” components which include a telecoms mast, syndicate shoot, and fishing rights.

Although the overall value rose by 4.7% between January 2015 and January 2016 to hit £38.5m, it was outshone by classic cars, UK resi and UK commercial property. The long-term performance looks to have held up very well though…

Catherine Penman, head of rural research at Carter Jonas: “One of the key attributes of agricultural land is its counter-cyclical nature. And whilst it is easy to focus upon the short-term performance of any asset class the Model Estate’s three year annualised return produced an impressive 8.1% per annum. This rose to 9.5% when the manor house was excluded and 10.4% when the commercial element was removed. This placed the Model Estate in second position, to classic cars. Since its inception in 2010, the Model Estate – excluding the commercial element – has maintained a strong position in comparison with the alternative asset classes, ranking third of eight within both the 5 and 7 year annualised rankings.”

 Download Knight Frank’s Luxury Investment Index Report here and Carter Jonas’ Model Estate Report here