Classic car prices fall but is the bubble about to burst?

The classic car market has experienced unprecedented inflation over the last decade and a bit, drawing both enthusiasts and investors to the growth safe-haven. Yet growth figures from wealth management specialists, Coutts, hint that the huge financial returns could be a thing of the past.   

Coutts' Passion Index, which tracks the changing values of a wide range of 'collectibles' has revealed that the increase in classic car prices has slowed for the second year in a row, with values falling by 10.4% over the course of 2016, which is a slightly larger fall than that witnessed in 2015.

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The two-year downturn is attributed to a drop in average prices within the $500,000-plus market covered by the index. What exactly has caused the market to taper off is unknown, but Dietrich Hatlapa of investment research organisation Historic Automobile Group International suggests that: 'Those who were in it just for the money have moved on. The market is now more in the hands of the collectors and specialists, which I think is good news for the real enthusiast.’

However, this slowing of the market shouldn't cause too much alarm when put in the context of the last decade, because between 2005 and 2014 classic car values skyrocketed by 399% according to Coutts. The last two of those years generated the greatest increases: 27.4% and 40% in 2013 and 2014 respectively.  And of the ten most expensive cars ever sold at auction, four of the top six were sold over that two year period with the most expensive, a 1962 Ferrari 250 GTO, selling for $38million during Monterey Car Week in 2014.

What's more, looking at the wider classics market reveals a brighter picture, with Knight Frank’s Wealth Report suggesting overall growth over all price sectors hit 9% in 2016 - although this still ranked as the leanest growth period for over ten years. And while the Coutts Passion Index depicts a potentially worrying state for classic cars, it's worth keeping in mind that virtually none of the assests covered by the report has sustain uninterrupted growth since 2005, suggesting that it's not just cars that are in the financial firing line.