Chinese Land Demand underpins Bordeaux wine-estate Prices

Chinese Land Demand underpins Bordeaux wine-estate Prices

On 22 December 2014 Guy Collins writing for Bloomberg Businessweek published an interview he held at the Saint Emilion offices of Vineyards-Bordeaux with Michael Baynes.

The interview was also filmed and covers a number of topics including the values of Bordeaux vineyards and how they have moved in recent years as Chinese investment has taken hold. Although we are still compiling our up to date list of all of the Chinese purchases made in the Bordeaux area we are confident that the number has now exceeded 100 in total. This sounds like a lot, and it is if it is considered over the time that the purchases have been made; but set against the total of Bordeaux vineyards it remains a small percentage, less than 1.5% of all Bordeaux vineyards in fact.

Michael Baynes
Chinese Land Demand underpins Bordeaux wine-estate Prices

Chinese Target

The key to the recent Chinese interest is the Bordeaux vineyard segment that they have targeted. The vast majority of their purchases have been under €5 million and less than 5 of that total have exceeded €10 million. This sub €5 million part of the market has the greatest supply and was most severely affected by the onset of New World competition during the 1990’s. After a decade of falling prices for the first 10 years after the turn of the century their prices proved very attractive to Chinese investors.

Collins quotes Baynes“I think these first 100 buyers of Bordeaux chateaux have absolutely called the market correctly and I think they’re onto something very interesting,” …. “What they look at is bottom line. They want what we would regard as a trophy because that sells wine. They don’t do something unless there’s a clear profit margin at the end of it.” What this means is that the Chinese have identified that their consumers are not sufficiently familiar with the individual appellations (such as Saint Emilion for example) and their respective brand strengths. Chinese consumers tend to focus more on the prestige of the Chateau castle itself and the overall regional umbrella brand strength that AOC Bordeaux provides. This interest in the sub €5 million market has had an important stabilizing effect on vineyard prices. They have stopped falling, levelled off and for prime in these lower price brackets property prices are starting to rise again

Price Trend

Collins writes of the Baynes interview, “Further down the scale, he said, prices have leveled off and for some properties are just starting to climb back after a 50 percent slump over the past 15 years.

‘In 2000, a nice Entre deux Mers Bordeaux Superieur parcel of vines would have traded for around 40,000 euros’’ per hectare, Baynes said. “Today that same parcel would be trading for around 21,000 or 22,000 euros and two years ago it would have been trading for around 20,000 euros. So we’re seeing a slight recovery, but from a position we’ve halved.”

He said there hasn’t been any noticeable slowdown in Chinese buying interest since a crackdown started on gift-giving and luxurious living styles in China.”

Demand Trend

“We have seen no effect at all, if anything we’ve seen an increase,” Baynes said, while noting the current pace of acquisition may be hard to maintain.

“It’s quite possible that there won’t be such intense purchasing by Chinese into the future,” he said. “Between 10 and 25 chateaux a year, that’s a lot of chateaux going to Chinese. Will that continue? No I don’t think that will continue. Will they fall in line with other nations that continue to be interested in Bordeaux? Yes, I can see that.”