Artwork v ASX: Are luxury assets outpacing financial markets?

As the number of high-net-worth individuals in Australia passes 42,000, Knight Frank has delved into the luxury goods they are purchasing and whether they are outpacing financial markets. 

The Knight Frank Luxury Investment Index tracks the value of 10 luxury assets, such as handbags, jewellery, coins, watches and cars.

While half of the 10 assets surveyed demonstrated gains during 2024, the overall index fell by 3.3 per cent compared to gains of more than 23 per cent by the S&P 500 and 7.5 per cent by the ASX 200 over the 12-month period.

This is the second consecutive year that the luxury index has reported losses.

However, performance was strong over a 10-year period, with the index reporting gains of 72.6 per cent, demonstrating the value of a long-term time horizon. Watches, whisky and furniture all reported gains of more than 100 per cent, with whisky, which lost 9 per cent in 2024, returning 191.7 over a decade. 

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But even this is still behind financial markets, with the S&P 500 having returned 181 per cent over the decade and the Nasdaq having returned 262 per cent. In Australia, the ASX 200 returned 35 per cent over the decade.

Liam Bailey, global head of research at Knight Frank, said: “Luxury collectibles have delivered for investors over the long term. If you had invested US$1 million in 2005 and tracked KFLII, your investment would now be worth US$5.4 million. The same amount invested in the S&P 500 would have been worth US$5 million by the end of 2024. 

“Unsurprisingly, the luxury sector weathered the global financial crisis better than financial investments, and with the ability to leverage these investments through financing, the boom for collectibles lasted for well over a decade from 2008. While it took equities several years to catch up, the past decade, and the past five years in particular, has seen a consistent pattern of stronger returns from the financial sector.”

The best-performing individual asset during 2024 was handbags which gained 2.8 per cent over the year, while the worst was artwork, down by 18.3 per cent. Knight Frank said it was a reversal of double-digit growth in the previous year and was damaged by lower auction sales which slumped after a brief COVID-19 rebound. 

“The art market is undergoing significant structural change, not only in how art is marketed and purchased, but also in terms of changing demand. Auction sales from the big three houses –  Sotheby’s, Christie’s and Phillips – peaked at US$7.8 billion in 2022, after a two-year climb from the COVID low, but by 2024 volumes had slumped by 48 per cent to US$4.1 billion. This lack of activity impacted on values achieved – which reached 70 per cent of their high estimate in 2024, down from 87 per cent in 2021.”

Knight Frank previously found the number of Australian individuals with more than US$10 million ($15.7 billion) in assets has passed 42,000, rising by 3.9 per cent over the past year. Currently, there are 42,789 individuals with this level of wealth and this was a rise of 3.9 per cent over the past year.

Out of the top 10 globally, Australia sat in ninth position, slightly ahead of Hong Kong which had 42,715 individuals and behind France in eighth place which had 51,254. The top position was held by the US which had a substantially higher volume at 905,413 individuals. 

The number in Australasia who had more than US$100 million sat at 1,918, up from 1,846 last year, and is on track to pass 2,000 individuals by 2028. The number set to have US$10 million should reach 51,983 in Australasia over the same period.