As the sharemarket stagnates and returns on property investments slide it may be time to follow the lead of a growing number of lateral thinkers who are diversifying into non-traditional asset classes.
The alternative investment universe presents many weird and wonderful options ranging from first edition comic books and antique toy collections, to football and military memorabilia to car parking and boat mooring spaces.
Once considered the province of the wealthy due to the level of risk involved, alternative investments are now being sought after by mainstream investors who are disillusioned with returns from portfolios of traditional investment vehicles.
Referred to by one breeder as “a stress-free investment that you can hug”, alpacas are in high demand, insurable and can provide numerous tax benefits derived from deductible expenses.
Not restricted to rural dwellers alpacas are commonly purchased by city folk and agisted. Large breeders are often willing to incorporate agisted animals in breeding programs, which leads to the fast recuperation of the buying cost.
Females sell for $1,500 to $50,000 depending on the genetics and quality of the fleece.
President of the Australian Alpaca Association, Richard Bowden suggests that from an investment perspective males, which go for $40,000 to $80,000, are best because the fee for servicing ranges from $1,000 to $2,500 and induced ovulation in the female means that a continuous cycle exists throughout the year.
Car Parking Spaces
The mounting scarcity of car parking spaces in Sydney and Melbourne is giving quite a boost to the niche investment parking space market.
Brett Matthews, joint CEO of Secure Parking, which operates and manages around 180 car parks around Australia, says that some parking spaces in Sydney CBD have sold upwards of $80,000. The average cost of one in Kings Cross or Ultimo would be $50,000.
Sold through real estate agents, car park spaces give a consistent return of 6.5% to 8%.
Mainstream investors have often by-passed art in favour of equities and property. But the economic downturn has led to noticeable growth in the art-buying sector.
The advice from Geoffrey Smith, National Head of Art at fine art auctioneers, Bonhams and Goodman is to seek pieces of high quality and impeccable condition and focus on “stable, blue chip artists”.
“Look for an artist who is prolific enough to maintain a market but not so prolific that they could be termed common,” he says.
He advises against the speculative buying of up-and-coming artists works.
A decent piece of art can be purchased for $10,000 to $20,000 if the buyer has an astute eye.
Smith says the way to stgelop a good eye is to subscribe to auction catalogues, attend exhibitions in the commercial sphere as well as public galleries.
He has clients who bought paintings for $10,000 15 years ago that are now worth $250,000.
Wine prices are heading up so buying well now would be a good move. But buyer beware, says Robyn Lewis CEO Winepros Archive and VisitVineyards noting that investing in wine is “fraught with danger”.
To avoid the traps: Cellar correctly.Record where it was purchased.Stick to known labels, good makers and red wines because they tend to age better.Never put wine in the post or leave it in a car in the middle of summer.Consider magnums and larger size bottles, which often appreciate more than regular size bottles because the larger the bottle the slower the maturation process.It’s not unheard of for the value of a bottle of wine to multiply 20-fold over a number of years, says Lewis.
Coins and Bank Notes
Coin dealer Paul Hannaford, past President of the Australasian Numismatic Dealers’ Association (ANDA) auctioned a 10 shilling bank note, the first printed in Australia, for $1.9 million.
Around the same time Hannaford’s business, International Auction Galleries, auctioned a rare Australian ‘Holey Dollar’ from 1813 for $250,000. Five years ago it sold for $100,000.
Warren Spencer, Gold Coast Coins and Stamps, advises investors to buy a coin with a history and the grade ‘extremely fine’ or better.
As more people are buying into this asset class the prices are going up.
Spencer says that $10,000 to $20,000 would establish a healthy investment although even $500 would buy a quality coin or note.
The investment value of a taxi plate has risen considerably over the past decade in Melbourne and Sydney due to the limited number of licences issued.
State Government regulation governs taxi licences therefore there is variation from one State to another.
Licences cost $500,000 in Melbourne, but only 40% of licence owners operate their own taxis. The remaining 60% are leased out to taxi drivers at about $24,000 a year.
Currently Sydney licences average around $372,000. Returns average 7% per annum.
In Queensland the government auctions a set number of licences. In NSW the value of a licence is set on the open market. In Victoria new licences are leased out by the state government.
A word of warning
Dr Thomas Henker, Senior Lecturer at the Australian School of Business, University of NSW cautions investors against alternative investments on the grounds that many don’t conform with the sole purpose test for superannuation investments.
In relation to raising alpacas Dr Henker notes that if this is an investment product that is being sold to you by a company then it is deemed an investment product. But if it is an investment idea that you do directly and you live on the farm and raise the alpacas you will not pass the sole purpose test.
The reason being that there are non-monetary benefits that you derive from living on a property that is not exclusively benefitting your retirement savings or the beneficiaries of the super fund.
Dr Henker says that the same applies to art. If you purchase a painting and hang it in your living room that will also cause a problem with the sole purpose test because there is some non-monetary benefit that you derive from it.