November 24, 2016 7:04 PM |
Posted By: Secret Supercar Owner
Rated 5.0 out of 5.0 by 1 member
Back in November 2015 I penned a couple of blogs on the car market under the title “Is the Boom Over”. Based on what I have seen in the last several months, the bubble now has a sizeable hole in it. If things started to look a bit shaky towards the end of 2015, the mega auctions in Scottsdale in January 2016 put a fork right thru it. These results coupled with what I have seen a few very savvy dealers do, would all indicate that the collector car market is now in a clear downward incline.
The January 2016 Scottsdale collector car auctions are an annual mega event that have set the tone for the market in past years. All the major players are present and this year all five auctions trailed last years results. The average sale price on the roughly 2600 cars sold was down 13% and amongst Ferraris the situation was significantly worse. Eight five Ferraris were put up for auction, and only 56 sold. Not a single Ferrari sold for more than its published high estimate, and 33 of the ones sold did not even make the low estimate. In fact, the total value of Ferraris sold in Scottsdale in 2016 was just over half of the 2015 haul. You would have to be extremely creative to put a positive spin on these results.
My second major indicator that the market has shifted is based on the actions of two of the savviest dealers I know. Over the past several years, both have been quietly buying up limited edition and high value Ferraris. These Ferraris were all stored and disappeared from sight. In the past six months, both have quietly sold off their big ticket stock. When those closest to the market, and who make their living in the market, take their money off the table, they normally have a very good reason for doing so.
How long it will take for this change to be reflected in asking prices is anyone’s guess. Looking through the classifieds, most prices certainly still look quite ambitious overall. However, the range in prices has broadened significantly as supply has continued to increase. Just checking Porsche Carrera GT prices in the US, “asks” range from just under $700k all the way up the high of just over $1 mil. with over 20 cars on the market. In the UK there are 17 Carrera GTs on the market in a range of £450k to £760k. Checking back over a number of weeks, it doesn’t seem like any of the Carrera GTs are finding new homes. With supply still at 2-3X pre-bubble levels, it will very likely be an ugly spring and summer for sellers.
Currently we have a situation where there is plenty of supply, confidence in the global economy has taken a major hit, the news out of China is not great, and interest rates have start to rise again. Not surprising, demand has dried up quickly as the pros have started to exit the market and many enthusiast-investors have gotten very nervous very quickly.
2016 Part II
Several months into 2016, the situation has if anything, gotten even more interesting. The May RMSothebys’s auction in Monaco failed to move its prime entrant, a Ferrari 275 GTB NART Spider. Twelve months ago, this car would likely have set a new world record for a NART Spider. The very low mileage Porsche Carrera GT was also a no sale, and a Ferrari 330 GTC sold for well under its low estimate. While there were a few cars that sold within the estimate range, the overall impression was of a market well into retreat. Looking at a few other interesting recent auction results, a Porsche Carrera GT with 14k mile on it went for $605k in Amelia Island (a second CGT was a no sale). That $605k sale price likely included a Buyers commission of 10-15% and a similar amount on the seller’s side. Net to the seller of the Carrera GT was probably in the range of $470k, which is where CGT asking prices were back in mid 2014. Of the Ferraris offered for sale at the Amelia Island auctions, 44% went for below their low estimates. A few that I thought were of interest include a Ferrari 365 GTB/4 Daytona which had an estimate of $750k-825k and was hammered sold at $550k ($605k including buyers commission). A second Daytona coupe with an even higher estimate was a no sale as was the Daytona Spider. A quick check of the classifieds still has asking prices on Daytona’s $700k-$1 mil range with the same cars being listed for sale month after month. Even more interesting was pair of Ferrari on which the vendors took not insignificant baths on after owning the cars for just over a year. The first is a Ferrari 288 GTO sold on the hammer at $2.35 mil (likely netting about $2.1 mil to the seller) which was purchased at a Scottsdale auction in 2015 for $2.75 mil. A second example is a Ferrari 330 GTS which was purchased for $2.4 mil in Scottsdale in 2015 and was hammered sold for $1.9 (net around $1.7 mil). These are rather large financial hits to take in a short period of time and it does beg the question on why the owners wanted to unload the cars so quickly.
Using the Carrera GT classifieds as a benchmark again, in the US, at the lower end asking prices have finally started dropping. On a few cars that have been on the market for multiple months asking prices have been reduced by $30k and now start at $670k. With sellers at auction currently netting well under $500k, the room for further reduction is significant, especially since the number of CGTs offered for sale has increased and there are now over 25 listed for sale. In the UK, asking prices haven’t moved yet and still sit at £450k to £750k but it is also the same 17 cars listed for sale as per several months ago.
While the continued increase in supply indicates that the boom is well over, when I see seven figure Ferraris being unloaded quickly for mid six figure losses, it is a clear indication of the health of the market. Smart investors cut their losses early and move on. From what I have seen, those that know the market best have been exiting, and fast. If this is the beginning of the slide south, we still have a long way to go before we reach bottom.
Part III coming soon…..