Asian buyers push up vineyard prices

Wealthy Asians are broadening their search for wine estates, driving major price hikes in regions such as Sonoma, Hawke’s Bay and Barossa Valley.

Sonoma vineyards: in demand

According to Knight Frank’s Global Vineyard Index 2014, the price of a “lifestyle” vineyard – that is, between 2-15 hectares in size – rose by an average of 4.5% in the year to June 2014.

As an investment, such a return beat the 3% return offered by wine during the same period, based on the Knight Frank Fine Wine Icons Index, as well as watches; however it fell some way short of the booming classic car market, which offered a 25% average price increase last year.

The biggest rise came from Sonoma County in California, where prices for lifestyle-scale vineyard property saw year-on-year growth of 17.9%. There were also strong price hikes in the Hawke’s Bay and Marlborough regions of New Zealand, where vineyard prices rose by 17.6% and 13.3% respectively, as well as Australia’s Barossa Valley, which saw a 14% rise.

While price increases were less marked in the Old World, Chianti proved popular with a 12% rise. Although Piedmont saw overall decline, significant interest in Barolo led to reports of sales close to €1 million per hectare.

Bill Thomson, chairman of Knight Frank’s Italian network, noted the challenge for buyers in identifying the right place to buy. “Wine, unlike almost any other agricultural product is very location sensitive and therefore within each area there are hundreds of micro-areas that are better or worse,” he observed. “Real local knowledge and research is the only answer.”

In addition, Thomson warned, “The complexity of wine is that heavy investment in areas can lead to oversupply with all the players reacting in the same direction.”

Despite big rises in the US and Australia, it wasn’t all boom for the New World. Vineyard prices in South Africa’s Stellenbosch region fell by -10%, while those in Chile’s Colchagua Valley slipped by -14%.

Although the nationality of buyers varied according to region, Asia featured heavily in many of those places that experienced a particularly large price rise. As well as continuing their well-documented acquisitions in Bordeaux, Chinese nationals dominated sales in Barossa and Napa Valley, with a significant presence in Marlborough too.

This diversification of property ownership matches the broadening demand among Chinese consumers for wines from different parts of the world. Organisation of Vine & Wine (OIV) data show that China’s value imports of French wine slid by -12.3% in 2013, while US imports grew by 8.8%, along with strong rises from Chile and Italy.

Although on a considerably larger scale than the focus of this Knight Frank report, last month saw Chinese tech entrepreneur William Wu buy a controlling stake in South Africa’s Swartland Winery.

The study also highlighted an upward trend from other Asian countries whose citizens are expanding their investment into vineyards. After China, the biggest buyers in Napa were from South Korea and Vietnam, while Hong Kong nationals are showing strong interest in Barossa.

In other areas, sales were led by different nationalities. US buyers led the way in Chile and Argentina, beating China to the top spot in Marlborough and showing significant interest in Bordeaux.

Meanwhile UK buyers, perhaps enticed by the weakened rand, showed the strongest interest in Stellenbosch, but also dominated sales in Provence and Tuscany, fighting off competition from Russian buyers in both these regions.

Citing OIV data that suggests Chinese wine consumption rose by 57% between 2000 and 2013, Nicholas Holt, head of research for Knight Frank Asia Pacific, commented: “The growth in Chinese appetite for wine is not only being echoed by a significant increase of imports into the country, but also by a rise in interest in vineyard ownership overseas.”

With the report finding that 45% of Chinese ultra-high net worth individuals (those with at least US$30 million in net assets) had expressed interest in vineyard ownership, the highest of any nation in the survey, Holt observed: “This interest is being translated into deals around the world, with Chinese investors notably the most significant foreign buyers in Barossa Valley, Australia; Bordeaux, France; and Napa Valley, USA.”