Global Courant
South Africa is currently facing a weak rand against the dollar, high levels of inflation and rising interest rates, putting increasing pressure on returns on traditional investments.
However, luxury items are proving to be a low-risk, high-reward option for investors.
“Investors can benefit from strong demand for luxury items locally and globally, as evidenced by the double-digit growth of the likes of Richemont and LVMH Moët Hennessy Louis Vuitton in the past fiscal year,” said Michael Zahariev of Luxity, a pre-owned luxury reseller.
“The luxury market has withstood economic turbulence and even outperformed most mainstream asset classes.”
“While gold has typically been a popular investment in tough economic conditions, personal luxury goods such as the Louis Vuitton Favorite handbag have outperformed this commodity over the past five years with annual returns of 263%. Gold, on the other hand, only returned 67% over the same period.”
He said luxury goods do not have any correlation to financial markets, unlike stocks and bonds, reducing their risk and protecting them from economic swings.
He added that reselling luxury goods is also a good investment.
“As luxury goods from reputable brands maintain their value over time and in some cases even increase in value, the pre-owned luxury market offers yet another investment opportunity.”
“Assuming the 75% increase in used luxury sales locally, the market is ripe for investment among South Africans looking for tangible value, long-term growth potential and a hedge against market volatility.”
“The low risk and high return of luxury investments can not only help secure their financial future, it could also provide them with a safety net to navigate the current economic climate.”
Luxury growth
Luxury brands have had a strong year, with Richemont and LVMH seeing strong growth in the markets – significantly increasing their owners’ wealth.
According to ForbesRichemont Chairman Johann Rupert of South Africa has seen his net worth rise from $8.9 billion (R165 billion) in 2022 to $11.9 (R206 billion) in 2023.
In addition, Bernard Arnault of LVMH has been battling South African-born Elon Musk for the title of the richest person on the planet for the past year.
Arnault is currently the second richest man on the Forbes list, with a net worth of $224.3 billion (R4 trillion).
Read: South Africans turn to ‘alternative investments’ – including solar energy and crypto
