A Hermès Birkin handbag with diamonds and crocodile leather. Mario Anzuoni/Reuters
CAIRO – 19 July 2018: Property, Property, Property. That is all one seems to hear when the question of investment is put forward. However, in the face of rising prices and in an effort to ensure their money stands the test of time and does not take a hit, investors have been looking past real estate and toward less traditional investment opportunities.
The move away from property investment is typically associated with the hike in home prices, especially those in areas perceived as second homes, as a result of inflation, pound floatation and recent devaluation. Mona Aboud, founder of the Egyptian Arab Company for Modern Building & Reconstruction, says the price of property increased “because the cost of the material needed for infrastructure has swelled.”
“Four or five years ago, the price of steel was LE 3,600 or LE 4,000; today it ranges between LE 12,000 and LE 13,000,” Aboud says, adding “building materials come from abroad and the price for moving materials to Egypt has increased. Similarly, electricity has also become expensive everywhere around the world and so the production process is more costly now.”
Alternative investment opportunities provide chances for people to buy items they like that they can benefit from and make money as assets appreciate in value.
The classics: bags, books and cars
Bags are a rather unusual item to invest in. However, many have been opting to purchase rare designer bags, leaving them to mature and then reaping the fruit of their patience; the same process is used with books, cars and wine.
“People pay for rarity, timeless shapes and good quality,” explains Vestiaire Collective's Fanny Moizant. Kerry Taylor of Kerry Taylor Auctions, a couture auction house, agrees, indicating that rare items are highly desired and sought after. “Classic couturiers from the early 20th century such as Christian Dior, Cristóbal Balenciaga, Elsa Schiaparelli and Yves Saint Laurent are internationally prized because they are so rare,” Taylor says, suggesting that there is hefty money to be made from investing in couture, given that one has an eye for rare items and patience to wait for it to mature.
Yet, Taylor explains that the profit margin is still a long way away from that of classic cars or wine.
When asked who is on top of the vintage game, Moizant, co-founder of Vestiaire Collective, suggested that Hermès is the belle of the ball, followed by Céline, Chanel and Louis Vuitton. “You pay 2.8 times today what you would have paid for a Birkin [Hermès bag] seven years ago—and that's just the retail price,” elaborates Moizant.
“There's a huge market for rare bags, and as soon as brands manage the distribution and restrict production, people will pay more. They want rarity, timeless shapes and heritage brands. I think they also like the emotional element of bags named after icons such as Grace Kelly—the bags become brands in themselves.”
Breaking the record on the Vestiaire Collective site was a ruby-encrusted crocodile Birkin bag (Hermès’s most prized bag) that sold for £150,000 (LE 3.59 million); the fastest item ever sold was a Chanel handbag that went in 17 seconds.
Talking a look closer to home, Samia Mohamed, who owns a high-end handbag and shoes shop in Cairo’s Zamalek district, specializing mostly in Christian Louboutin, the French fashion designer, but also selling vintage handbags suggests that investing in designer limited edition bags and jewelry is a great alternative in today’s economy. “The market is limited in Egypt, the customers are from a rich background, mostly from Zamalek and Heliopolis. Throughout the years, those interested in investing in handbags have decreased, however, over the past couple of years, the market has enjoyed a revival,” says Mohamed, who has been in this line of business for some 40 years. The early 2000s was a great time for this business in Egypt, with many women recognizing the opportunity in bags, however, the 2000s saw a change in lifestyle with many abandoning this trend, or simply not purchasing more, explains Mohamed.
Speaking to two of her customers, one indicated her confusion concerning the decrease of interest in investing in vintage bags. Nour Mohamed, a mother of two in her fifties who breeds horses, says, “I do not understand why people no longer invest in vintage bags. You know, we used to meet in the sports club or the rotary or whatever and we would discuss the new vintage bag that we have added to our collection; this is no longer the case. … My daughter did not like the idea at first but I got her into it; I think it is important in terms of a solid investment but also as a hobby.”
The other customer, Salma Hamza, a 23-year-old business student, explains that it is important to diversify one’s portfolio and that vintage bags provide an excellent opportunity for those who do not have a lot of money to invest but enough to want to invest. “I kept doing freelance work and getting money and then wasting it in ‘silly’ things, and so I wanted to invest in something. I looked at property and gold, but I did not have enough money; this is why I started buying bags. Now I own two bags.”
Investing in books is also a long-term investment, much like handbags, and often requires 14 years to see significant returns, explains John Windle, founder of John Windle Antiquarian Books. Although Windle suggests that 14 years is enough, Aly Nasr explains that this is not true. “It takes about 40 to 50 years in order for one to see significant returns on books,” says the 43-year-old bookseller who owns a small shop in Downtown Cairo. Although the profit is less than that of the bags, many still choose to enter the book market rather than the handbag market, as it usually has lower prices.
“If you buy a book from me at $2,000, for you to get your money back you’re going to have to wait until it’s worth $4,000, and a dealer will pay you $2,000 for it,” Windle explains. “That cycle is typically about seven years. The first seven years you wait to get your money back. In the next seven years the book may appreciate beyond what you paid for it, to a point where a dealer might pay you $3,500 because now he can get $7,000 for it.” It’s not a bad place to put money with a reasonable expectation that it will grow, explains Windle. Investing in books, however, seems to be somewhat similar to saving certain denotations of currency for the future to be able to sell it for more, it requires a long time and does not offer the highest profit margins.
There are a number of reasons to invest in books, one of which is book lovers can enjoy reading and re-reading their favorite books in its first edition, while also investing. “Most of those who buy classic books are book lovers buying the books to read and have at home, rather than to invest, but at the same time, they end up investing. You will find that those who invest in alternative investment assets buy into those assets because they are passionate towards them and enjoy using them,” says Ahmed Mostafa, a middle-aged bookseller in Nasr City who sells both new and old books.
Nasr agrees with Moustafa, adding, “There are two good reasons for one to invest in books: first, the books act as a great way to decorate one’s house and are available for one to enjoy reading, whilst also acting as a way for one to maintain the value of one’s money, provided that the classic books one invests in are international books; second, it’s a way for people to spread their eggs over multiple baskets.”
When asked why investing in international classic books is more secure than investing in local or regional books, Nasr explained that this is not the case for all books, “International books enjoy having the US Dollar as a caliber and so, they are somewhat secure in the face of currency fluctuations. However, when it comes to classic Arabic books, they often operate in Egyptian Pounds within Egypt and so, they could be affected by currency fluctuations. This is not the case for all Arab books though; some books are so important that they are not affected by any fluctuation in currencies.”
Overall, it seems that investing in books offers a multitude of benefits, particularly if one invests in international books and is a bookworm.
Investing in cars beat equities and gold in 2011, according to Historic Automobile Group International (HAGI), and peaked in 2015, but faced a rocky 2017, according to transaction data between 2006 and 2018. But despite its ups and downs, classic cars have been on top of the alternative investment assets for the past 10 years, with a growth of 192 percent, performing better than fine arts and wine.
While an increase in the number of cars entering the market has led to a depression in prices during 2017, the market still grew at 3 percent, and is expected to keep growing in 2018, concludes a report by AXA Art, a global art insurance specialist. In fact, classic cars that are valued at more than $1 million accounted for 2 percent of the market volume, but 40 percent of its value, explains the report.
While it would be expected that the relatively big profit that could be gained from investing in the classic car market should attract more investors into the market, AXA reveals, “classic cars are purchased by people who are not typically driven by financial considerations, but by an admiration of iconic design and high performance.” Evidence of this can be seen in the upsurge in demand for Porsche cars from the 1980s.
When investing in classic cars, there is also the concern of depreciation due to damage, according to The Telegraph’s Emma Simon. Although this is also the case for fine art, bags and wine, the risk is higher in cars due to the fact that they are often kept in a garage or showroom, rather than a safe. And unlike fine art and wine, cars require running expenses, meaning that they require yearly running repairs and maintenance; if repairs are delayed or ignored, the profitability of the investment is affected.
Thus, investing in a classic vehicle is a tricky act, done best by car lovers. Still, cars are one of the safest investments; “We've discovered that classic cars move independently to any other investment area. That's an attractive attribute for collectors and investors alike,” says Dietrich Hatlapa, the founder of HAGI index, who has 20 years of experience in the finance sector under his belt.