Why do possessions change value?
As you read this, your possessions are changing in value. Some could be worth almost nothing in two years – next stop, charity shop. Others could be appreciating rapidly. Christopher Digby discusses the reasons why.
If you’re an early adopter of technology, you might have paid a huge sum for the latest gadget. But as newer, smaller, shinier versions come onto the market, yours quickly devalues. You either stick with the old one or get the new edition - and now you’re got two.
In such cases, your “possessions portfolio” has either gone up or down, and any home contents valuation is out of date. To further complicate things, you never know what will become retro chic. If you hold on to it long enough, your video games console might become vintage…
The Downton Effect
Popular culture shining a light on a particular time period can drive up values.
If the next big Netflix show references a particular epoch, anyone owning furniture or clothes from that period could find their collection is worth more than they thought.
We saw a huge number of men adopt Don Draper’s slicked-back pompadour hairstyle when Mad Men first appeared on our screens. Possessions are no different. Downton Abbey’s popularity saw a rush of people wanting to recreate the manor house look, and original period furniture saw an uptick in value.
Who’s buying art now?
Art collectors are getting younger, and this is boosting the values of contemporary art.
According to AXA Art, young collectors now represent up to 25% of the total market.
The AXA survey states that around a 1 in 4 art buyers are professionals under 40, who tend to buy from artists and galleries, rather than online or pricier auction houses. As AXA says, “They may have more limited resources, but they share this desire to be well aware, know and look at everything. Their purchasing behaviours favor exploration and they are less risk-averse than their elders.”
US Trust reports that these people see art collecting as an investment more than a lifestyle choice – where older generations get attached to their art, the younger collections are more willing to buy and sell. This means supply and demand can be that bit more erratic, with associated fluctuations in value.
The economics of jewelry
The entire world history of gold mining has only dug up 190,000 tonnes. With such limited supplies being traded on the open market, the price can vary wildly. But that doesn’t mean all your jewellery is subject to such price swings.
Standard, mass produced rings and earrings, are most subject to movements in the value of their base ingredients. But high-end pieces derive most of their value from the creativity and craftsmanship that’s gone into them. If it’s an exclusive piece, it could well be appreciating fast, regardless of fluctuations in the gold markets.
Precious metals like gold, silver and platinum have always been subject to market forces. But until quite recently, the world diamond market only had one serious player. As a result, where other precious commodities fluctuated, diamonds prices remained stable – stably high.
Added to that, in the mind of the public, diamonds inextricably linked with the sentiments of love and romance. Because of this, it’s relatively rare to sell them on the secondary market. Even where marriages fail, diamonds are forever.
The tendency not to resell diamonds means movements in valuation are largely tied to the currency they are valued in, the almighty dollar. Watch out for any significant movements in the US dollar price. Any strengthening against the pound means it will cost more to replace your jewellery.
Home insurance often sets a claimable limit on any individual item
As well as the total the policy can pay out, home insurance policies often set a limit on the value which can be claimed for any single item too (in insurance terms this is called an inner limit). So, if any item drastically rises in value it can outpace your inner limits, and leave your home underinsured.
Keeping valuation certificates, receipts and proof of ownership is prudent – as is having regular valuations. We recommend reviewing the value of your home contents at least annually.