Glittering luxury

The Julius Baer Wealth Report Asia monitors the cost of luxury living and wealth creation trends in Asia. In this feature, we examine the demand drivers and price trends for luxury jewellery.

Jewellery and gems are among the most favoured passion investments among high net worth individuals (HNWIs) in Asia. The jewellery item of reference in our Julius Baer Lifestyle Index is the Cartier Love Bracelet, which consists of 204 diamonds totalling 2.18 carats. Created in 1969, the bracelet can only be worn and removed with a special miniature screwdriver that can be worn around the neck, symbolising the key to their lovers’ heart. The Cartier Love Bracelet was named one of the most sought-after jewellery items in 2016 for its unique symbolism.

Consistent with our previous year’s findings, the Cartier Love Bracelet remains the most expensive in Shanghai (USD 48,143) due to high import tariffs on luxury jewellery (approximately 40%). On the other end, Kuala Lumpur (USD 41,818) replaces Hong Kong as the most price competitive market. This arose from the twin effects of higher prices in Hong Kong and marked declines in Kuala Lumpur.

On average, prices in the region were flat year-on-year although there were intra-city fluctuations. Hong Kong saw the most significant price gain (+9.5%), whereas Mumbai experienced the biggest decline (-6.1%).

Prices of the Cartier Love Bracelet across Asia As of 13 August 2018. Source: Julius Baer Investment Publishing Asia.

Pricing the priceless
What justifies the price tag of a luxury jewellery piece? A prestigious brand, the intricacy of the craftsmanship as well as the quality of the precious stones, all enhance its desirability.

In open auctions, different factors come into play. The main driver behind the auction prices of luxury jewellery? The rarity of a piece. Yet there is one feature that cannot be easily valued in the auction market. “You can never place a price on provenance. Provenance history – knowing where it came from, who was wearing it before – that is quite impossible to put a price on and it will play out in the auction room,” says Mr Quek Chin Yeow, Sotheby’s deputy chairman for Asia and chairman of International Jewellery, Asia.

China – Crazy rich Asian demand
The rise of mainland Chinese buyers over the past decade bears close watching. Despite China’s anti-corruption drive, the impact on domestic spending on high-end jewellery has been limited. According to Euromonitor, luxury jewellery sales in China increased by 6.6% year-on-year to CNY 14.9 billion (USD 2.17 billion) in 2017. Many mainland Chinese continue to buy rare pieces that include top-of-the-line diamonds, coloured gemstones and jadeite to diversify their investment portfolios amid a volatile global economy. Vintage signed jewellery has also garnered investor interest, given their appreciation in value in recent times.

Luxury jewellery – a glistening investment outlook?
In recent years, fine jewellery has been gaining traction as an investable asset. According to Mr Quek, “the great thing about jewellery today is that it is considered as an investment vehicle. A lot of our clients today look at jewellery as part of their wealth portfolio, which is very different from 10, 15 years ago when the market was not as sophisticated.” Caveat emptor applies: returns from collectables may be hard to realise. As well, the market for precious stones is difficult to predict, while insurance is costly.

Asian buyers have proven to be a dominant force in the global high-end jewellery auction market. Remarkable auction results in recent years are testament to the buoyancy of the Asian market. Clearly, luxury jewellery will not be losing its lustre in the region.

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