The Evolving Landscape of Luxury Investments: Insights from the Knight Frank Wealth Report 2024

Recent data from the Knight Frank Wealth Report 2024 reveals that luxury investments—including art, classic cars, wine, jewelry, and luxury handbags—constitute an average of 20% of ultra-high-net-worth individuals’ (UHNWI) wealth. The motivations behind owning collectibles are as varied as the collectors themselves, encompassing joy of ownership, investment potential, status, community belonging, and intellectual interest. While collectibles can provide diversification to investment portfolios, they also come with unique risks and financial rewards. Following a record-breaking 2022 in major auction houses, the years 2023 and 2024 have painted a more nuanced picture of the market.

2024: A Year of Mixed Results for Collectibles

In 2024, Christie’s reported global sales of USD 5.7 billion, marking a 6% decline from 2023 but still outperforming the overall art market, which is estimated to have contracted by 20%. Auction sales fell by 16% to USD 4.2 billion, while Private Sales surged by 41%, reaching USD 1.5 billion. This trend highlights a counter-cyclical pattern, where private sales tend to thrive in challenging auction markets, reflecting clients’ trust in more confidential transactions.

Among the standout pieces was the Aga Khan Emerald, a sensational Cartier Emerald and Diamond Brooch, which sold for CHF 7,765,000 at the Magnificent Jewels Geneva auction. The dominance of 20th and 21st Century art continued, although ultra-contemporary art saw a notable decline. Luxury collectibles experienced a 31% drop compared to 2023, largely due to an exceptional jewelry collection that entered the market the previous year. However, categories like watches, handbags, and wine remained robust, with René Magritte’s L’empire des lumières setting a Surrealist auction record at USD 121.2 million. Notably, 81% of bids in 2024 were placed online, underscoring the importance of digital platforms in the current market.

Shifting Dynamics in the Global Art Market

The art market has undergone significant transformations over the past decade, driven by changing collector behavior and digital advancements. A third of Christie’s clients are new each year, with a preference for 20th and 21st Century art and luxury categories. New collectors are increasingly inclined to diversify their collections across various categories rather than specialize in one area, a trend that contrasts with the more focused collecting habits of previous generations.

Regionally, the art market has become increasingly globalized, with distinct dynamics in different areas. The Americas accounted for 42% of global sales, demonstrating resilience on both the selling and buying fronts. Europe and the Middle East contributed 32% of auction sales, with Paris experiencing a 24% year-on-year growth. Meanwhile, Asia Pacific represented 26% of sales, excelling in luxury, which accounted for 42% of global luxury spending.

The Rise of Asia and the Future of Collectibles

Over the past two decades, the United States has consistently held a 40-45% share of the art market, while China has seen its share rise from 5% in 2004 to 20-30% in recent years. The combined market share of London and Paris has declined from 24% to 21% since 2019. Notably, Hong Kong has emerged as a global hub for art, with cities like Seoul, Shanghai, Tokyo, and Singapore gaining traction, albeit regionally.

The market for modern and contemporary Indian art has also shown dynamism, with record prices being achieved for works by artists like M.F. Husain. As interest in contemporary and digital art grows, the landscape continues to evolve, with 20th and 21st Century art remaining the most sought-after category, while classical art has seen a decline.

The Impact of Emerging Technologies

Emerging technologies such as virtual reality, blockchain, and AI are reshaping the art market. Christie’s has launched Christie’s Ventures to invest in innovative startups that drive this transformation. For instance, Proto’s hologram technology allows for high-definition 3D reproductions of artworks, facilitating global promotion without the need for physical transportation.

Christie’s has also been a pioneer in applying blockchain technology to the art market, recording sales through a digital registry. While the acceleration of this practice has been modest, the company remains committed to exploring its potential. Cryptocurrency payments are accepted, contingent on consignors’ willingness to embrace this form of transaction.

Engaging Younger Collectors

Christie’s is actively targeting Millennials and Gen Z, who now represent 41% of bidders in luxury categories. This demographic tends to favor contemporary art, particularly in Asia. To engage this audience, Christie’s employs dynamic online platforms, innovative campaigns, and tailored exhibitions.

Looking Ahead: Trends and Strategies for Wealth Managers

As the art market continues to evolve, wealth managers should be aware of several key factors. First, diversification through art, jewelry, or watches can enhance risk management for clients. Second, it’s essential to emphasize the enjoyment of owning art rather than viewing it solely as an investment, given the market’s inherent unpredictability. Lastly, clients interested in financially driven purchases should explore auction guarantee schemes, which can provide opportunities for acquiring valuable pieces at potentially reduced prices.

In conclusion, the luxury investment landscape is complex and ever-changing. As collectors navigate this dynamic market, understanding the interplay of trends, technologies, and regional dynamics will be crucial for making informed decisions. The future of collectibles promises both challenges and opportunities, making it an exciting time for investors and enthusiasts alike.