Australians are normally quite an intrepid bunch, but our wings have been clipped this year thanks to The Bat Kiss.
Not only has international travel been taken completely off the cards, but domestic travel has also been a challenge, with many states and territories closing their borders to each other and enforcing strict hotel quarantines. Sydney Airport, usually the country’s busiest, has seen flight traffic dwindle by 97% – terrible news for airlines, but great news for car fans, as last week’s ‘once in a lifetime’ Porsche event proved.
While many of us have found that we’ve spent the money we’d put aside for holidaying in 2020 on other things – toilet paper and the mortgage spring to mind – but there’s a case to be made that we should be investing what dosh we’ve got left in the piggybank on luxury goods. Not only because we deserve a treat (although that’s a major reason), but because it makes financial sense.
Not sold? Hear us out.
As The New York Times observed in the aftermath of the Japanese asset price bubble burst in the 90s, sales figures from brands like Hermès, Gucci and Chanel continued to remain strong despite the recession. It underscores a truth that the rich have known for years: buying luxury goods during a recession can be a valuable investment. It’s a tip that Asian luxury consumers have cottoned on to far quicker than Western ones.
During a recession, conspicuous consumption and being flashy is no longer simply unfashionable, but a poor financial decision – for both consumers and brands alike, as The Fashion Law relates. Buying (or, if you’re a brand, emphasising in your product range) quality goods that will last a long time makes more sense, which is why luxury investors tend to eschew obvious branding and instead choose more minimalist styles, and hardy materials like leather or metals.
To use an example you might be more familiar with, it’s like how in the watch investing world, ‘stock’ Rolexes tend to appreciate in value better than ‘iced-out’ ones. Similarly, quality luxury goods that avoid trendy styles or patterns are a better investment than the alternative – both functionally and literally.
It’s also a pertinent consideration when you consider how you might apportion private and business use for, say, a satchel bag or briefcase when applying for a tax deduction. You want something that will last a long time in order to maximise your investment. You’re also more likely to get a tax reduction for something that’s un-flashy and functional instead of something ‘blingy’.
DMARGE spoke to Fernando Prieto, Directo of Solid Partners Accounting & Advisors, who related that record-keeping is crucial if that’s an avenue you want to go down.
“Just like any tax deduction, it [all] comes down to information,” he counsels – whether that’s a Louis Vuitton satchel or office supplies.
View this post on Instagram
Now, it’s a bit late to be claiming bags and the like on your tax returns this year (unless you’re overdue, in which case you should stop reading this and go do your taxes, fool). But it is worth keeping in mind for next year’s tax returns, particularly as travel might not be an option for the foreseeable future.
Besides, if you’re hoping to treat a luxury purchase like an investment, keeping your receipts and having your paperwork in order is crucial if you want to resell in the future.
To use a previous example, let’s take Hermès and their famous Birkin bag, the design of which has barely changed since its introduction in 1984. Birkin bags are a famously good investment, thanks to their timeless appeal and high desirability. Indeed, handbags had an overall return of 13% last year according to the Knight Frank Luxury Investment Index – outperforming art, watches, wine or diamonds as an investment – leading CNBC to declare that “handbags have officially become an asset class.”
The takeaway? If you’ve kept some money aside for travel that’s burning a hole in your pocket, why not consider spending it instead on some quality goods that you’ll either benefit from in your day to day or that you can keep in store as an appreciating asset. With the economy looking like it’s going to be in the toilet for a long time yet, plus both domestic and international travel still off the table for most of us, investing in luxury goods will not only bring you some joy in a year where we could all do with a little spoiling, but it could end up being quite a good money move in the long run.
Besides, every gentleman deserves accoutrements befitting of their status.