A month ago at the RM Sotheby’s auction, held at the prestigious Pebble Beach Concours d’Elegance, a 1962 Ferrari 250 GTO sold for US$48m, or AUD$61m. The owner had purchased the Ferrari for US$10.24m (adjusted for inflation) in 2000. That’s a return of 372% in less than two decades, with inflation accounting for less than 25%.

A week ago, a Honda Integra Type R DC2 sold at a Barrett-Jackson auction for US$65k – more than AUD$91k.

A few days ago, Peter Brock’s 1982 Holden Commodore racing car sold at auction for AUD$2.1m.

While this looks to be a very healthy result for car investment, and we don’t wish to take anything away from the specialness of those particular cars, it’s indicative of a dramatic acceleration of collector car values in recent times. We believe we are witnessing the top of the market, or at the very least, the crest as we reach the top.

We acknowledge that this is a bold call, but our job here at Harris & Silverman is to provide our clients with the best possible information on the market, rather than being its steadfast and vocal cheerleader. No market can withstand substantial explosions in growth without some kind of eventual correction. Collectable cars have had an amazing run by any measure, but our analysis is that there will be a pullback of all values in the near future.

In the past months we’ve also seen a BMW E30 M3 and an E28 M5 being offered for $75,000 and $70,000 respectively. Twelve months ago these were worth 25% more on the open market. We consider these to be signs of market fatigue, and early indicators of a coming recession of values. It’s impossible to know what losses will eventuate, but it’s not going to be a single percentage drop across the board. Models that saw significant gains may lose 40% or more, whilst lesser appreciated vehicles may only incur a 20% correction.

So what does this mean for you? Well, if you have a vehicle that was purchased as an investment and has already seen a pleasing increase in value, now might be the time to sell and take advantage of the market before the worst of it hits. If you’ve purchased recently, we would suggest holding until the market recovers. Don’t lock-in any loss of value by selling when the market is low. Simply hold and wait for the market to recover. The worst thing you can do is panic and buy high, sell low.

Some of this correction will be linked to the coming housing marketing crash, which we wrote about nearly a year ago. As we predicted then, the cracks are now beginning to show and property values are starting to go backwards. Baby boomers who are on the edge of retirement will feel the pressure of rising interest rates and falling house prices, and will want to cash out. This will flood the market and the problem will snowball. And because the significant majority of classic car owners are baby boomers with disposable incomes, they will attempt to sell these vehicles at the same time. It’s a market of dominoes, but it is one that you can play to your advantage.

The result of all of this doomsaying means that there is about to be a significant buying opportunity within the car (and property) markets. We will see floods of Porsches and Ferraris being offloaded by scared owners, alongside their investment apartments and beach houses. The only people who will be buying will be those who are calm and have the vision and nous to read this as nothing more than a market correction, however minor or significant, rather than proclaiming it as the apocalypse.

If you don’t believe the coming property crash will affect you in any big way, our suggestion would be to put some money aside to take advantage of this buying opportunity within collectable cars (and maybe a spare beach house with a good garage?). Cars have outperformed all other assets for the past few decades, and will hold that honour again in the future. No recession is forever, and all markets eventually recover. Whether it’s a positive period of time or a slaughter depends on how you plan, and your attitude.

As always, we will continue to monitor the market and identify models that are undervalued and will provide good returns. We are here to talk to you and help in any way we can. Please feel free to call us on 1300 941 937, or email us at members@harrissilverman.com.au.