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March 25, 2015updated 02 Mar 2016 11:14am

Is global demand driving the red-hot classic car market off the road?

By Zak Smith

Astronomical figures continue to be fetched at classic car auctions, raising fears over another Eighties-style bubble. With a Ferrari 250 GTO hitting a staggering $38 million in 2014, is too much money pouring into the market, or do simple supply and demand calculations tell a different story?

I spoke with John Taylor, Director at GT Two, a luxury car specialist skilled in the art of finding the unique and unobtainable. Car fixer for entrepreneurs, ageing rock stars and auto-enthusiasts, John is adamant that the current market ‘offers some of the most significant returns on investment in comparison with other asset classes’. There is an unprecedented level of interest with investors and enthusiasts alike building collections of rare, desirable models, he adds.

What has lead to such a hot market? According to John, the distortion emanates from greater sums of international uninformed money that did not exist during the bubbles of the late Eighties. Arab, Russian and Indian cash has been quickly and steadily pouring into the classic car market, inflating values of cars that traditionally wouldn’t have seen such dramatic price increases. The prime example is a Ferrari Dino: five years ago, they were available at around £100,000. Now some are fetching closer to £400,000. Few investments today could generate such returns – and if the car qualifies as a classic, it could be CGT exempt.

However, the result is that uninformed investors are paying over the odds, in turn dragging up the prices of recent, less collectable Ferraris. I ask John if he thinks the bubble is imminently going to burst. ‘I currently expect the classic market to continue to perform strongly, and as values increase for niche classics like Ferrari, so those [who have been] priced out search for the next best thing, where values in old Maseratis have been steadily rising in the past year or two.’ There doesn’t seem to be much panicking in the market, and where domestic money pauses, foreign speculation doesn’t blink.

I spoke with one Ferrari collector outside JD Classics in Mayfair. Admiring the boys’ toys in the window, I asked him how he felt about the current climate. ‘It’s rather toppy’ was his answer. Nevertheless, he recently took delivery of a new limited edition Ferrari and is closing in on another classic. The reality of the market is that with limited supply and burgeoning demand, inflated valuations may become new price benchmarks.

How many Ferrari 250 GT Lussos were built between 1963-64? 351. Demand vastly outstrips supply. There will only ever be a finite quantity of rare cars exhibiting the right provenance, service history and low mileage. With the Hagerty Market Rating Index, a benchmark for classic auctions, at buoyant rather than overheated, expect rare auto-exotica to continue to strengthen in value. The only pity is that with more cars treated as investments and less as mechanical art to be enjoyed, we will see less and less of these rare beauties on the road.

Picture: Ferrari 250 GT Lusso Berlinetta by exfordy. Licensed under CC BY 2.0 via Wikimedia Commons

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