This week on 18th August the Financial Times published an article offering a snapshot analysis of the Bordeaux vineyard market and who is buying Bordeaux vineyards in the context of the strengthening Bordeaux vineyard market and in light of the last 5 years or so of investor interest from Asia. Although it was not only the Chinese that were buying Bordeaux vineyards, their story is by far the biggest since in the past 5 years they have averaged between 50% and 60% of the Bordeaux vineyard buying market. It is clear that Chinese investors recognized the value available when buying Bordeaux vineyard but in hindsight their timing appears remarkable.
The principal source of data for Bordeaux vineyards is the quasi-governmental agricultural body known as the SAFER. Whilst the SAFER numbers provide data about buying Bordeaux vineyards, it can nevertheless be misleading to a certain extent since they include all vineyard transactions (except share transactions) meaning they also include parcels of vines without any trademark, production facilities or chateau. It is further misleading in that they have not included share transactions, meaning those transactions where the buying a Bordeaux vineyard is actually buying a the shares of a company that owns a Bordeaux vineyard. Since this latter subset are typically the most expensive chateaux, there are some very high value Bordeaux vineyard sales missing from their data and therefore lowering their recorded prices. In an average year there are about 700 vineyard transactions in the Bordeaux region spanning approximately 110,000 hectares. However, about 675 of these transactions are small parcels of land most commonly traded between neighbours and with nothing more than land with vines on them – sometimes very scruffy vines at that. What that means is that there are really two markets of investors buying Bordeaux vineyards. The largest is the market for parcels outlined above while by far and away the smallest is the Bordeaux vineyard chateau market. The Bordeaux vineyard chateau market is of course the market that we are all interested in and it is this market that journalists such as Hugo Cox writing in the Financial Times are writing about when they publish articles such as this. What can be confusing however is that although he is writing about the Bordeaux vineyard chateaux market he is nonetheless using data that includes the 96% of vineyard transactions that are not part of Bordeaux vineyard chateaux but are just parcels which suggests that it is still possible to purchase a Bordeaux vineyard chateau for under 20,000 Euros per hectare. While it may indeed be possible, in our experience those days are long gone now and the recovery for Bordeaux vineyard chateaux is well on it way – even if the recovery for parcels is still lagging behind.
There is no doubt that there has been and is a big story at the moment regarding the Chinese buying Bordeaux vineyards, but we have to remember that there are only about 25 sales per year that take place across the whole Bordeaux AOC – consequently the Bordeaux vineyard market is quite small and specialized.
Real estate markets are almost universally cyclical and there is no reason to believe that the Bordeaux vineyard market is not following a classic pattern of peak and trough – up and down. But when we look at the data it is clear that the timing for buying Bordeaux vineyards is exceptional at the moment. The graph indicated above is the graph tracking the dramatic drop in vineyard prices from the year 2000 to the current market cycle. Whilst in most years our vineyard expert team have a significant percentage of the Bordeaux vineyard transaction market (between 25% to 35%); this year Vineyards-Bordeaux has as of August 2016 sold 11 Bordeaux vineyard chateaux with another 5 under offer. Investors are buying Bordeaux vineyards through us at the moment ranging from under €1 million Euros to over €31 million Euros and in all of the appellations across the region. It is our opinion that we are now firmly in the recovery phase of the Bordeaux vineyard market cycle with the prestigious appellations such as St Emilion, Pomerol, Margaux etc well and truly in their upward recovery already.
But just consider where we were 17 years ago. The largest segment of the Bordeaux vineyard market is the Bordeaux regions represented by the “Cotes de Bordeaux” and “Bordeaux – Bordeaux Superieur.” Combined they amount to about 70% of the total Bordeaux vineyard region by area and therefore are representative of the majority of the Bordeaux market. The graph above shows that at the end of the last century we were trading average per hectare vineyard prices at over €55,000 per hectare – today in 2016, prices are about half of that value per hectare on average (remember that this average includes the parcels). Clearly an average takes top prices and bottom and we are seeing in our business some market leaders starting to push well into the market price territory seen 17 years ago and in some cases going beyond those historic prices – but there is a long way to go still and in our opinion buying Bordeaux vineyards can be considered a serious investment again.
Give us a call if you have any questions – we love what we do and look forward to sharing our lifestyle with those who are also passionate about Bordeaux vineyards and their wines.