IE takes a look at rising asset values and what it means for the industry.
Asset values are rising right now across the UK. Property hotspots have seen houses with gardens with good transport links nearby rise by over 50% during lockdown, as the great exodus from London continues for those able to WFH. Sure, the rising asking price value doesn’t mean the overall rebuild risk has changed profile, but it often brings cross-selling opportunities for brokers and insurers and that is worth thinking about.
Another opportunity could be a new outbuilding or extension, fuelled by the rising property value itself of course. Mnay existing homeowners have decided to stay put and build up, beneath and out of their existing four walls. That needs insuring and the asset needs re-pricing. The challenge is finding the right data to underpin those quotes.
For example detailed flood history mapping from LexisNexis could be useful if your client is planning to dig out a super basement. The latest drone footage could also be useful if you are trying to understand how close nearby brooks or streams are to gardens where elaborate outbuildings are being planned. It’s interesting that earlier in August Ordnance Survey bought some equity in drone specialist Flock.
Companies like Hiro are also aggregating the data from home based devices like Ring doorbells, smart appliances and room temperatures, leak detectors etc to better understand risk. That data can also help price the risk on extensions, man cave sheds, extra bedrooms, garage conversions or bi-folding doors leading from bigger kitchens onto entertainment patios and hot tub areas in the garden.
There is so much more to property value than the rebuild costs, the asset offers extra value via new uses, home working, home entertaining.
CLASSIC CARS AND MOTORCYCLES
One classic car owner told IE at the British Motor Show recently that his insurer had automatically revalued his Daimler Dart by an extra 10K, since the market is booming in classic cars right now. Indeed lockdown has also sparked runaway price inflation in the classic motorbike market too, with a pro-restored Yamaha RD350LC now changing hands for £9000-£12000, compared to about £6000-£8000 pre-lockdown.
The big challenge for classic brokers is pricing assets accurately based on the level of originality – since that affects resale values a great deal – and the standard of restoration work. Gathering data from classic car restoration and parts supply specialists will be difficult, but in the end, it will lead to a more realistic online valuation, when matched against auction house and private sale data.
COMMENT FROM THE CAR CROWD;
According to the latest Knight Frank Wealth report 2021, classic car values have increased 193% in the last decade, making them the 2nd fastest appreciating luxury investment category (behind rare whiskey) in that time. Like many other luxury investment items, classic cars have felt the impact of Covid-19. 2019 in particular was slow for cars with the pandemic impacting auctions and sales of cars and resulting in a decline of 7%. However, the classic car market is recovering quickly and in 2020 it saw a growth of 6%, putting it into 3rd place in the Knight Frank Luxury Investment Index (KFLII), behind handbags and wine.
Going into 2022 and beyond the industry expects further recovery and growth of the classic car category as car events and live auctions once again open up.
At TheCarCrowd.co.uk we provide a platform that enables investors to club together to buy classic cars to spread the risk across multiple vehicles and share the rising cost of storage, insurance and maintenance. Because TheCarCrowd cars are stored, insured and maintained together, we can pass on the benefit of economies of scale to our investors. Another part of our commitment to our investor community is to get their cars out into the light for everyone to appreciate. We therefore run and attend events throughout the year as well as find opportunities for our network of cars to earn money for investors from paid work. Flexible insurance to enable us to move vehicles, store them at events or paid work, drive them in parades etc is critical to us and not something that we’ve found readily available.
That point on running classics and hiring the asset is another crucial factor, because the Car Crowd are really onto something. Not everyone can buy a classic car, some may be happy to rent one three times a summer – but who insures that dream ride and how do you price the risks? By crunching data, as they famously said in the classic action-comedy Point Break.
Brokers and MGAs alike can offer PAYG cover for film and TV work, promotional events, or just enthusiast hire for the day. Partnership is key and data-sharing between partners in the asset chain should be the gateway to real-time pricing of risk. Driver history, location, vehicle restoration and storage facility, then proposed usage by the hour, or day – all that data needs to be stacked properly to make sense.
Here are some stats for you;
According to Watchpro magazine 25% of all luxury watch sales are Rolex. This brand dominates the watch investor market, although Patek, Audemars Piguet, Cartier, Omega, IWC and many more all have their devotees. The demand for models like the Rolex Submariner ‘Batman’ bezel is such that a new one can be bought for £8000 and ‘flipped’ the next day for about 14K. Seriously. These assets are not easy to price because models like the Rolex Air King simply don’t have the lengthy waiting lists that the Daytona and Subs have.
Then there are vintage watches, with all the esoteric details that collectors know and love, which affect values. For example, did you know that Rolex insist that a factory serviced watch from the 60s-90s has new hands fitted, even though that may wipe over 1K off the resale value? Trying to re-lume the hands on a WW2 military wristwatch may well devalue the watch, since it isn’t the original radium paint being used. How data like that can be fed into quote engines is a big challenge, but for those insuring collections worth over 100K the work needs to be done. Otherwise policyholders will not accept the paltry sums offered if the watches are damaged beyond repair or stolen.
The rise in watch values is attracting more thieves of course. Most insurers already insist that luxury watches are held in a locked safe when not being worn. But thefts in-person – in public – are on the rise. A man died in Wigan when a gang beat him unconscious for his Rolex and the Guardian reports on a gang who targeted older men to literally drag the watches from their wrists. Brokers may need to re-think watch insurance using location data sharing, smartwater marking and make use of the blockchain enabled watch passports now being offered by brands such as Breitling.