The Wealth Report 2025: The Great Luxury Correction

The Douglas Elliman and Knight Frank Luxury Investment Index (KFLII), which tracks the performance of 10 popular investments of passion, reveals that handbags were the best performing luxury asset class with prices marginally rising 2.8% in 2024. Despite financial markets soaring in 2024, the Knight Frank Luxury Investment Index (KFLII), fell (-3.3%) for a second year in a row, leaving collectors and investors to navigate a changing landscape where scarcity no longer guarantees returns.

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While five out of the 10 collectibles sectors tracked managed growth in 2024, even for the top performers the uptick was modest. The most surprising was classic cars, which saw growth of 1.2% through the year, following a sharp bear market through 2023 and the first half of 2024.

As with several of our collectible sectors, the low growth seen in handbag values belies some real strength in the market. As the report notes, “the ultimate classic handbag, the Hermès Birkin in black Togo leather, is now more valuable than ever when sold on the secondary market.”

The weakest sectors were fine art, wine and whisky. Art was down 18.3%, with the market seeing a total reversal from the double-digit growth of 2023 and a worse performance than during the Covid-19 crisis when values fell 17%. The next weakest sector was fine wine, down by 9.1%, impacted by rapidly changing consumption patterns.

The fine wine market enjoyed a bull run inspired by low interest rates during Covid. As the report notes this resulted in speculative price growth, with Champagne and Burgundy in particular surging in price. The absence of Chinese buyers has also weighed on the market.

Rare whisky, a market weighed down by a rapid growth in stock returning to the secondary market after a decade of strong growth, had its second poor year with values down 9% in 2024, and is now lower by 19.3% from the market’s peak in summer 2022.

Liam Bailey, global head of research at Knight Frank said: “Luxury collectibles have delivered for investors over the long term. If you had invested US$1 million in 2005 and tracked KFLII, your investment would now be worth US$5.4 million. The same amount invested in the S&P 500 would have been worth US$5 million by the end of 2024. Unsurprisingly, the luxury sector weathered the global financial crisis better than financial investments, and with the ability to leverage these investments through financing, the boom for collectibles lasted for well over a decade from 2008. While it took equities several years to catch up, the past decade, and the past five years in particular, has seen a consistent pattern of stronger returns from the financial sector.”

The rise of online marketplaces has significantly altered the luxury landscape. For established sectors, like art, it has aided transparency and given new buyers confidence to enter the market. At the same time, online has encouraged the expansion of the definition of luxury collectibles to include NFTs, rare sneakers, and Pokémon cards. Social media has amplified these trends, fueling demand but also intensifying competition for investment.

The art market is undergoing significant structural change, not only in how art is marketed and purchased, but also in terms of changing demand. Auction sales from the big three houses, Sotheby’s, Christie’s and Phillips, peaked at US$7.8 billion in 2022, after a two-year climb from the Covid low, but by 2024 volumes had slumped by 48% to US$4.1 billion. This lack of activity impacted on values achieved – which reached 70% of their high estimate in 2024, down from 87% in 2021.

In a smaller market, contemporary art continued its growth in terms of share of all sales, rising from 31% in 2021 to 38% last year. Young contemporary art grew from 10% to 13% over the period Female artists also attracted attention, with their share of sales rising to 33% of post-war art sales and 56% of all young contemporary sales.

New York remains the center of gravity for the global art market, accounting for 62% of market share by value in 2024, while London took its biggest share in four years at 21%. One area of the market is demonstrating real strength – lots sold under US$50,000 rose from 6,500 in 2019 to over 11,000 in 2024, a 69% increase. In contrast, over the same period, lots sold over US$1 million fell by 28%.

Full results of Knight Frank’s Luxury Investment Index Q4 2024:

Sources: Compiled by Knight Frank Research using data from Art Market Research, Fancy Color Research Foundation HAGI, Rare Whisky 101 and Live-ex

Notes: All data to Q4 2024 except colour diamonds (Q3). The overall Knight Frank Luxury Investment Index (KFLII) is weighted average of individual asset performance.