There seems to be a lot of talk about the classic car market being on its way towards a bubble burst – or perhaps even already being in the midst of one. We try to unravel the true status.
The thing is, there are probably just as many trying to talk it down again – claiming that the market is perfectly stable. Others decide to take the middle-ground, settling on the market currently experiencing a “correction” of sorts – which granted does sound a lot less violent than a bubble burst.
It’s only natural that there will be mixed opinions about the current state of the classic car market. What makes it difficult to get to the bottom of the issue, is that when you seek the view of various specialists, most will in one way or the other have invested interests, and will thus try to influence the direction of the market. Classic car dealers, auction houses and for that matter the very well-off private investors have been having an absolute ball since the classic car market started to climb again back in 2009 and then sky-rocketing from 2011. Needless to say, they don’t particularly want the party to end.
On the other side, the grassroot enthusiasts with limited to average disposable income or equity have been suffering during that same period, as they witnessed their dream classics which they had always promised themselves, suddenly jump well and truly out of their financial reach. Some of these enthusiasts are cheering on the bubble burst, hoping they might get a second chance of parking that early 911, E-type or Pagoda in their garage after all.
This is where the observant reader will probably point out that ViaRETRO and its authors will most likely equally have an invested interest. But as we adhere strictly to the motto that “any classic is better than no classic”, write about the classics we already own, drive or simply love, and are generally just pretrolheads dealing in what we could call “the classic car dream”, we actually feel confident that we can maintain our objectivity in this matter: ViaRETRO is not dependent on the market being in a certain state, nor do we profit directly from it. We are as enthusiastic about cars now as we were ten years ago, independent of price.
On that note, I simply went out into the field and both observed and spoke with various people during the recent Classic Motor Show at the NEC in Birmingham, and my colleague and friend Claus Ebberfeld did the same at this past weekend’s InterClassics in Brussels. This is what we found:
On a very unscientific level, the general feel I got from strolling around the many dealers present at the NEC, was that asking prices were certainly still strong. Most roughly on par with what we have grown accustomed to over the past few years in the classic car market, but also with a few quite surprising asking prices pitching well above what I have previously witnessed. A Rover P6 – albeit in lovely condition and with a mere 14,000 miles on the clock – up for £34,500 springs to mind! But I certainly didn’t sense any dip in the asking prices, and neither did I stumble across any amazingly good value deals. But then these are asking prices. The giveaway word here being “asking”. Dealers and private vendors can of course put any number they fancy on the For Sale sign stuck to the windscreen – it doesn’t mean the car is worth that number, nor that it will sell for that number.
A more thorough investigation was clearly required. I stopped by for a casual chat with Gary Puxty from Graeme Hunt Ltd. – renown for having the largest classic car showroom in Kensington. They were quite clearly having a good weekend, as by mid Saturday they had already sold two cars at the exhibition. Both very high quality automobiles, being a ’65 Jaguar E-type FHC at £142,500, and not least a stunning ’35 Bentley 3.5-litre Owen Sedanca at £232,750. Further to these two confirmed sales, Gary reckoned there were a few other enquiries from the weekend which would lead to a sale. This was a similar performance as what they had achieved during last years Classic Motor Show, so as far as Graeme Hunt Ltd. are concerned, the classic car market is still strong, there is no bubble, and certainly no burst. Gary did however agree that the marked had smartened up recently, and the craze was somewhat moderated now. Where just about any classic car was by many considered a great investment just a year or two ago, it now needed to be the right classic car. Matching numbers, original, with provenance and history, and so forth… The right classic cars with all of that, are still in demand and climbing in value, according to Gary. But all the lesser classics which had been dragged up in price by the good ones, have now seen a slight drop in price again.
I moved on to the nearby stand of Aston Workshop where I found Gary Potts to be ever so straight-shooting and open about their take on the current marked. Thus far they hadn’t sold a car at the exhibition, yet – but as their company relies just as much on the workshop part of the business as it does on the sales, this didn’t really worry him. There had been many interested enquiries on the stand – lots of them regarding their workshop and restoration services. Besides, seeing as this was the first time they had a stand at the Classic Motor Show, Gary made the point that they obviously didn’t have any set standard or expectations to compare with. But in general terms of where the classic car market was currently at, it seemed that Gary Potts from Aston Workshop largely agreed with what Gary Puxty from Graeme Hunt Ltd expressed.
In a nutshell, while any Pagoda was by most regarded as a bombproof investment just a year or two ago, you now need a 280SL with matching numbers, desirable colour combination, original condition, known history and preferably with the rare and coveted 5-speed ZF manual gearbox. But find that Pagoda, and it’ll still be a sound investment. I suppose the ’70 Aston Martin DB6 mk.II on their stand was “one of those Pagoda’s” then. Considering what a DB6 typically sold for back in 2008, I couldn’t help but feel that 329,950 was a fair chunk of cash. But as Gary pointed out, this was one of only 220 produced mk.II’s, matching numbers, the right colour and even a huge history file. So yes, it was the right DB6 to have in your garage, and compare it with something similar with a prancing horse on, and the DB6 suddenly seems like a bargain. Regardless, the whole gist of our talk was once again that the market has simply smartened up. At Aston Workshop, Gary was even so honest as to comment, that while he felt it was a shame that some people were now slightly stuck after having bought the wrong classic car purely as an investment, he believed that once the correction to the marked had passed, we would all come out on the other side with a healthier and better classic car market. Quite a refreshing view coming from someone in the trade.
With this in mind, and having passed a few more “SOLD” signs on various classic cars, I reached the stand of TRGB. I wondered for a while how this end of the marked would be perceived as doing. Selling Triumph TR’s is no doubt a rather different market than selling Aston Martin DB’s, right…? And then I noticed that three out of the five TR6’s on display, had the word “SOLD” written across the top of their For Sale sign. Not just that, but the three cars sold, were also the three most expensive, with the two cheapest Triumph’s still being up for grabs. Guess that in itself really answered my question then! Nonetheless, I still had a pleasant chat with Workshop Manager Richard Dempster from TRGB. He was calm and reassuring as he explained that sales in their last quarter had been the second best in the company’s history, and came very close to beating their best quarter ever. No bubble had burst here then. So apparently there are similarities in the market of 25 grand classics and 500 grand classics, as in both cases the current market clearly favours the best of the best. As such, Richard felt they were in a good position, with a strong demography of TR buying enthusiasts, who were now buying into what their father had once owned. He however felt a lot less convinced that prices would hold up on the modern classics.
Next stop was the Silverstone Auctions that were being held on both the Saturday and the Sunday at the NEC. While a bidding war between two committed enthusiasts can sometimes end up presenting a skewed picture of what is perceived as the current market value, at least auction prices are totally transparent. None of this high asking price – low selling price shenanigans.
There was quite a theme of hot Fords at the auction, and I must say that the sales – at least on one account – somewhat contradicted Richard from TRGB. While some of the earliest Fords to be auctioned over the weekend, such as a Lotus Cortina mk.I and an utterly stunning Escort mk.I RS1600, failed to sell, the later Fords – the modern classics – performed really well. A Fiesta mk.I XR2 exceeded its high estimate selling at a strong £22,500, and several Escort mk.III’s in both XR3i and RS Turbo guise also sold well. A perfectly presented Capri 280 Brooklands with a mere 5,500 miles on the clock managed to make £47,250. Cosworths did well too with a ‘96 Escort Cosworth Lux with only 837 miles establishing a new record for the model with £91,125, and a perfectly preserved and original ’88 Sierra Cosworth RS500 with 6,000 miles achieved the second highest price for the model when the hammer fell at £112,500. The star of the show however, was the drop-dead-gorgeous Escort mk.II RS2000 Custom with only 927 miles on the clock and in total time-warp condition. It surpassed even its high estimate as the hammer dropped at a record setting £97,875. A massive price for an Escort mk.II of any sort! You could probably argue all day long that the hot Fords are experiencing what surely must be a bubble in values – but there is thus far no sign of it bursting.
I surprisingly noticed a similar trend among the 911’s. For a long time now, the early 911’s have been all the rave. However, at the Silverstone Auctions, only one of the three pre-’74 longhood 911’s managed to sell. The G-series 911’s, 964’s and 993’s ventured much better with all but one G-series 911 managing to sell, and most achieving at least their minimum estimate. A concours-winning 944 S2 also did well in seeing £21,938, thus proving two points: the modern classics are indeed in fashion, and it is the absolute best of any model that’s getting all the attention, with poor and even average condition cars being largely discarded.
On that note, while the Volvo 1800E/ES has in recent years doubled in value, the white 1800ES up for auction at the NEC was an automatic, with a hole in the roof for the aftermarket Webasto, and an odd looking vinylroof coming right down the c-pillars and onto the upper rear wings, doing absolutely nothing good for the otherwise pretty lines of the Swedish shooting brake. As such, I wasn’t terribly surprised when the 1800ES failed to sell. Again demonstrating that only the best of the best are currently keeping the market up, a silver example of the normally very popular-with-collectors BMW 3.0 CSL with the full Batmobile kit did manage to sell at the auction, but only at a very low £65,250 – almost 15 grand below its lowest estimate! I suspect the non-original 3.5-litre engine from the Eighties and a less than concours restoration was largely to blame for the poor result, even though one could argue that this was in fact a CSL which you could truly justify driving and enjoying out on the roads – but that’s not where the money is at.
As the hammer fell for the final time on the Sunday evening, Silverstone Auctions saw £3.6 million change hands and a sell-through rate of 67% of the lots. Certainly a very decent result on the whole, but not as strong as what the market has been achieving in previous years, where for instance the same auction at the NEC managed £4.5 million and 81% back in 2014, and the following year managed £3.7 million and a 74% sell-through rate. Here’s a link to the full auction results: Silverstone Auctions NEC 2017
And now over to my collegue on the mainland:
Readers should firstly note that I am blessed with being a sceptic, as well as having a dark past as an economist. I warned Anders beforehand that it would be very difficult to determine the true state of the market by interviewing professionals in the market. However, I kept for my self that it is even more difficult to identify a bubble. The economic definition of a bubble is defined as a situation where you “trade in an asset at a price or price range that strongly exceeds the asset’s intrinsic value”. So tell me: The beforementioned 911, E-type or Pagoda have doubled in real selling prices in five years. Is that “wrong”? Or has their intrinsic value indeed doubled?
Surely that is not an easy question to answer. And indeed asking this question while standing in the middle of the three-year-old and already quite popular InterClassics in Brussels, having just visited a brand-new show in Hamburg and knowing that the classic car shows in Germany have doubled in numbers in two years, there seems to be some logic to what Anders already suggested: Classic cars are simply more popular than ever. By the same logic prices should be higher than ever.
And regarding the “bubble”-question: No one can answer that. Historically most bubbles are only identified afterwards – when prices have dropped! Indeed some use that as the true definition of a bubble.
A word of warning can be found in the economic theory, though: Economic bubbles often occur when too much money is chasing too few assets. By that rule of thumb the classic car markets seems destined for a bubble situation, as the rich and merely well-of have better and better conditions but the number of cars is set.
This specifically applies to the best cars, just as Anders identified: An original, unmolested and unrestored car can not be replicated. It must therefore be much more expensive than all the average cars that are just – well, average. Even with the option of creating more average cars – namely out of the truly bad cars. That’s why we still see new records be achieved – for very special cars.
The headlines made by those very best cars may very well have contributed to a goldrush-feeling in the classic car world. Indeed I personally believe that to be the case – helped by taglines such as the below.
However, I too wandered around a classic car show inspecting cars and sure enough, my observations confirmed Anders’ point: The best sold. And some rare ones sold. And some merely average in quality or lacking in originality or history did not sell. But surely there can’t be that many lipstick red 300 SL Gullwings, two-owner Toyota Hilux or one-owner Ford Taunus Coupés around? And that Mercedes S-class from the W126-era at 13.000 Euro – well, its condition was so impeccable, that I almost jumped on it myself. The nice Montreal offered at 63,000 Euro sold as well.
On the other hand, there were some average cars with price tags very much out of the oridinary. And they did not sell: if you have the guts to demand 75.000 Euros for a BMW 3.0CSi E9 Coupé, it had better be better! And so a picture was painted: Some – dealers as well as privateers – had either not seen the market stagnation, or simply did not care and set prices skyhigh while completely ignoring that their cars were avarage. Buyers beware, as it was in fact somewhat difficult navigating in this smokescreen of inflated prices.
Anders quite rightly identifies auctions as better indications for the achieved prices, but there was none at the InterClassics. So for the purpose of this article, I had a look at some recent large auctions – and the picture is unconclusive:
At the recent Bonhams auction at the Auto e Moto d’Epoca in Padova, more than half of the lots did not meet the lower estimate. At the Artcurial auction in Paris in november a Porsche 924 Carrera GT sold for less than half the price of comparable advertised cars, but in October their all-Mercedes sale went well, selling a 300 SL roadster at 1,4 million Euro, and not really showing any steals at all. In London, RM Sotheby’s had a terrible sale with almost half of the lots unsold, while Bonhams at Quail Lodge back in August took a Mclaren F1 to new heights – 13 million Euros.
Unconclusive, as said. And probably also completely irrelevant to the average classic car buyer. So what if there is a bubble up there in the upper stratosphere of classic cars? We – the average classic car enthusiast – could not afford those cars before the bubble either!
The interesting thing is that the top prices for top cars have apparantly smitten all sellers, and it certainly seems as though no one wants to be caught out with too low an advertised price. Better safe than sorry, so put another third on top of what might suffice, seems the philosophy. But that’s not a bubble as such – that’s merely sellers dreaming of a bubble.
However, this environment is rather difficult to navigate in for the showgoer, who might occasionally stumble upon someone realistically pricing their car, thus making it – somewhat artificially – look cheap against the other fare. The question arises whether you should really consider the car shows as such – rather than as marketplaces?
But outside of these exhibitions you might still find cars which are truly good value: Indeed I went to InterClassics armed with the intention of choosing the “Find of the Week” from the ranks of cars for sale there – but had to surrender the case, and chose one from the inexhaustible internet instead. Affordable classics are still out there – which points against the bubble theory as well. I’ve even started seeing 911’s that seem reasonable value! Surely a good thing.
So, while now is probably not the best time to invest in a classic car aiming for sure gains on the horizon, it should not stop the enthusiast either. Just choose a car you like and you will always win. “Any classic is better than no classic”, as we say.
And with those words – back to Anders.
So in summary the classic car market certainly appears to be cooling – or experiencing a “correction”, as seems to be the popular term. There is still strong interest in classic cars, and with that demand comes the high prices that we have experienced over the past six to eight years. However, the craze has somewhat subdued, and buyers are now doing their homework properly, and seem to be much more selective when deciding what to place their money in. Originality, high factory spec, condition, history and provenance are all key words right now. Classic cars which have all of that are indeed still increasing in value. However, more average condition classic cars have generally taken a bit of a hit, as the investors and collectors are bypassing these cars and waiting for the right car to come onto the market. Another current trend is clearly the increased popularity of the modern classics from the late eighties, the nineties and even the early noughties. A younger demography of money-strong enthusiasts have entered the market, and are now making an impact as they search out the cars that they dreamt about while in their teens.
And now to a confession on my part: Well, I too am among the many diehard, grassroot, hands-on enthusiasts that have had to wave goodbye to several of my classic car dreams over the past eight years or so. Yes, I too dreamt of that longhood 911 in my garage. The Montreal. Or how about the Sunbeam Tiger?
Now if the market was really in a bubble that was about to burst – that might improve my case! However, do we really want a proper full-blown bubble burst?
On the face of it, that might seem appealing to the enthusiast with limited funds. But I’m not so sure! The higher values achieved by pretty much every classic car over the last eight years, has also brought many good things with it. For starters, with classics being worth more, there has also been an increased amount of forgotten old cars being dragged out of old barns and garages and being resurrected. Surely any enthusiast must admit that this is a good thing, rather than letting those cars just continue to die because it wasn’t financially feasible to restore them. With more cash being spent in the industry, it has also encouraged the production – or re-production – of many previously NLA spare parts. Through this increased interest from various manufacturers classic departments or independent specialists, it has become a lot easier for us enthusiasts to source the parts we require to keep our classics on the road where we want to enjoy them. The vast boost in interest and exposure which the classic car scene has seen, has also lead to heaps of new events to the point where the classic car calendar is now overflowing with things to do, right from informal Cars n’ Coffee meets to excellent driving tours or huge exhibitions. Again, this is surely a good thing which none of us want to lose again.
So where would I personally prefer the classic car market to go? Well, probably somewhere along the lines of what’s happening now to be honest: A mild and slow cooling of the market rather than a drop-off-a-cliff bubble burst. It seems there is also a tendency where this the cooling of the market leads to a bigger price split between the best and the average of any given model. If this is indeed where the market is headed, I reckon it might very well work out to everyone’s advantage too. The investors and high-profile collectors get to retain their playground where they collect and trade in the best of what’s around, while the hands-on enthusiasts get to enjoy a slight decrease in value of those useable classics which we so dream of owning and driving.
But what say you, dear reader: How do you feel about the huge increase in value which classic cars have seen over the past eight years or so? Do you think we will experience a bubble burst some time soon? And if we do; is that a good thing or a bad thing?