How will the demand for passion investments evolve in Singapore?

According to the 2024 Knight Frank Wealth Report, Singapore is projected to have 5,535 ultra-high-net-worth individuals (UHNWI) by 2028, up 15.7 per cent from 2023. With the growing population of HNWIs and UHNWIs in Singapore, what impact will they have on the landscape of luxury passion investments?

Surely they would want to deck their homes with blue-chip art, fill their garages with supercars and vintage rides, stockpile their cellars with fine wines and whiskies, or adorn themselves with designer clothes, collector’s timepieces and high jewellery

Industry observers we spoke to believe so. “With more UHNWIs in Singapore, we will likely see an increase in luxury passion investments here, or at least an increase in interest level,” said Dr Victor Kwan, head of programme at the Singapore University of Social Sciences (SUSS).

“Luxury consumers have been buying luxury goods primarily out of passion,” offered Dr Sonja Prokopec, professor of marketing at ESSEC Business School, Asia-Pacific. “Now, some of the luxury categories are proving to be worthy as alternative investments, such as luxury watches, fine jewellery, whiskies and leather goods – primarily handbags.

“These are the sectors where UHNWI are showing a growing interest in, because they can now rationalise their purchases while enjoying the benefits of wearing or consuming many of these beautiful and rare pieces.”

The Knight Frank report observes that even as the number of family offices have grown, the link to direct spending and investing is not clear-cut. Still, market data from Statista shows that the luxury goods market in Singapore is expected to generate US$4.23 billion (S$5.67 billion) this year, growing at 3.36 per cent annually to 2028.

A TASTE OF THE FINER THINGS

For fashion influencers like Willabelle Ong, who has more than one million followers on Instagram and TikTok, the appeal of luxury fashion items is obvious. Their visual attractiveness, quality craftsmanship, exclusivity, prestigious brand identity, timeless design, symbolism and exceptional shopping experience make them a far more attractive investment option than traditional investments, she said.

“These objects can also be passed on to the next generation as a form of a unique love language to each family. I can definitely see myself appreciating and sharing my collection with my daughter, Ava Eleanor,” she added.

The Statista report points out that luxury watches and jewellery constitute the largest segment, with a market volume of US$2.427 billion in 2024, or about 57 per cent of the luxury goods sector. This is hardly surprising, given that Singapore is currently the fifth biggest market for Swiss watch exports, the market growing by 12.5 per cent since 2023.

Watch collector and influencer Ryan Ong, who has more than 15,000 followers on social media, notes an emerging trend within collector and investor circles. “There is increasing interest in vintage and independent watch brands,” he shared.

“Affluent investors are drawn to the unique designs, craftsmanship, and exclusivity offered by vintage timepieces and independent watchmakers. This niche segment presents opportunities for investors to diversify their portfolios beyond mainstream luxury brands and potentially capitalise on undervalued or overlooked pieces,” he added.

Market volatility and portfolio diversification are two key growth drivers fuelling the rise of luxury passion investments. “With so much volatility in the market, UHNWI are shifting their strategies toward asset classes that are more niche and thus less subjected to speculations,” explained SUSS’s Dr Kwan, citing the examples of art and collectors’-grade cars.

“These investments are less liquid than others. And that’s a good thing [because] there will be less ‘punting’ and more gradual, consistent value appreciation. This suits what UHNWI are looking for – not so much making a quick buck but holding on to their investments and growing wealth over time.”

Alongside the growth in the luxury passion investment landscape comes supporting initiatives such as storage facilities. Incidentally, Kwan was the former managing director of Wearnes Prestige, where he administered the Wearnes Bonded Gallery, a high-security, climate-controlled supercar storage facility on Leng Kee Road.

Other similar facilities include Le Freeport – formerly known as Singapore Freeport – a storage, display and trading platform in Changi, and maximum-security vault Fine Art Storage Services, also in Changi. Each of these facilities offer custom duty- and tax-free environments, as well as services that help investors apply for bonded licences or handle tax-related matters professionally.

“Besides storage, exclusive communities of such investors are also forming,” noted Dr Kwan. “For example, 33Club is one of the first private clubs in Singapore that provide a space for art, jewellery and watch collectors to gather and collaborate. These activities will foster further growth in luxury passion investment.”

Whisky funds and clubs are also gaining ground in Singapore, allowing investors to pool their resources to buy a diversified portfolio of whiskies, either to invest or drink together. According to Simon Lim, CEO of Zico Asset Management Pte Ltd, one such club that has already tapped the appetite for fine and rare whiskies is Pacific Whisky Club.

“This increased demand has been driving up prices and making these assets more sought after as investments,” said Lim. “Pacific Whisky Club was set up to manage this interest, both for investment, as well as a point of fellowship and network for the appreciation of whisky as a lifestyle choice.”

Meanwhile, Billy Tham, co-founder of the annual The Malt Affair, says that whisky festivals are becoming more prevalent, allowing collectors and enthusiasts to network, learn about new whiskies and fuel further interest in whisky collecting as a luxury investment. “The Malt Affair’s focus is on showcasing rare and vintage whiskies, unique distilleries and independent bottlings involving the local whisky community as well as influential overseas whisky collectors,” he said.

RISKY BUSINESS – AND HOW TO MANAGE IT

Like any form of investment, basic portfolio strategies and discipline apply when investing in objects of desire. According to industry observers, investors should clearly define their investment objectives, risk tolerance, and time horizon before building a portfolio of luxury passion investments.

With alternative investments continuing to outperform traditional investment vehicles, savvy HNWI and UHNWI are building and strengthening their luxury passion investment portfolios. And one key asset class they’re hedging their bets with is whisky. Blue-chip brands like Macallan and Yamazaki have proven track records of value appreciation and liquidity.

“Whisky as an asset class has outperformed the S&P 500 and all other alternative asset classes like wine and art in the last 10 years, according to the Knight Frank Wealth Report 2024,” stated Zico’s Lim.

Lim’s firm manages the Provenance Whisky Investment Fund, which focuses purely on whisky assets as a financial investment. The fund is registered with the Monetary Authority of Singapore as a restricted scheme, which means that it’s only available to accredited investors.

“The fund is made up of investors who are diversifying their portfolios beyond traditional asset classes and allocating a portion of their wealth to alternative assets. It forecasts capital gains of easily 20 per cent net of fees in the next few years,” said Lim.

The Malt Affair’s Tham advises investors to invest in what they like to drink and trust that their tastes are similar to like-minded individuals. He also suggests finding distilleries or bottles that are scarce, aged in special casks or boast unique flavour profiles. Those that have reviews and ratings from whisky experts tend to be more favourable, and their value rises over time.

In the fashion world, Willabelle recommends investors to zero in on established luxury brands with strong reputations and rich heritage, which tend to hold their value better over time. “Consider investing in iconic fashion houses with a long history of craftsmanship, innovation, and cultural significance,” she said.

Other factors to assess include exclusivity/rarity, condition and authenticity. Ong explained: “Look for fashion items that are highly sought after and have limited availability, as they have the potential to become coveted collector's items. Invest in items that are well-maintained, preferably in pristine condition, and accompanied by authenticity certificates or documentation.”

If investors are in the auction market, they could consider investing in pieces that have been worn by influential figures, featured in iconic fashion moments, or represent significant cultural movements.

In the timepiece universe, Ryan advocates conducting thorough research on the market, including historical performance and trends. Additionally, he says that engaging reputable dealers or auction houses with a track record of authenticity and transparency can mitigate the risk of purchasing counterfeits.

WHAT'S ON THE HORIZON

In the near future, observers predict that interest in passion investments will continue to rise. SUSS’s Dr Kwan believes that other niche collectibles, such as vintage toys or movie memorabilia, might gain prominence.

For Willabelle, the luxury fashion market is becoming increasingly digital. “This trend opens up opportunities for investors to explore online marketplaces, virtual showrooms and digital fashion platforms that cater to affluent consumers,” she said.

However, luxury brands have not forsaken their physical presence, she notes, with many of them investing in experiential retail concepts such as immersive flagship stores, personalised services and interactive exhibitions. Expect to see more such initiatives in time to come.