Market watch: Million-dollar classics are slowing down, and big collections still matter

At first glance, auctions in Amelia Island were almost unchanged from last year to this year. But a closer look suggests the top of the market is now weaker and collections are still a big draw.

Total sales hit $79.6 million, a slight drop from the $80.7 million recorded last year. Auction houses focused on bringing better cars in 2019, which explains why we saw 452 lots, which was 35 fewer than hit the block last year. That said, the 71-percent sell-through rate and average sale price of $247,906 both showed small improvements over last year.

So why the concern?

Well, several million-dollar lots went unsold. That happens, but we’ve seen it occur more frequently in recent years. The sell-through rate of million-dollar lots at Amelia Island hit 90 percent as recently as 2014, but has fallen steadily in the years since to 55 percent this year.

One contributing factor appears to be the the tax reform bill that Congress passed in 2017, which excludes cars from a capital gains deference vehicle known as a 1031 exchange, thereby limiting appetite for million-dollar cars. The classic vehicle market is also lately tracking behind other asset classes like the stock market. Since 2015, the S&P 500 has increased over 35 percent, while the Hagerty Blue Chip Index has increased only 9.3 percent. Faced with limited interest from bidders, sellers may also be holding back big cars. If values at the top of the market decline, a reverse substitution effect could affect vehicles further down on the value scale as more desirable collector cars are available for less money.

What worked? Collections that were big enough and unusual enough to get the attention of enough enthusiasts bought strong bidding. The auctions featured two big collections that bracket the automotive landscape; Don C. Boulton’s lot of  29 Brass-era (1890–1919) vehicles at Bonhams, and the “Youngtimer collection” of 10 recent classics at RM Sotheby’s (out of 140 in the collection being auctioned this year). That lot ranged from a 1986 Mercedes-Benz 560SL to a 2005 Acura NSX. Gooding & Company offered a headline collection of 10 notable Porsches owned by WhatsApp founder Jan Koum. It ranged from a 1992 Porsche 911 Carrera RS to a 2016 Porsche Cayman GT4. It didn’t bring the same outstanding results as the Brass and Youngtimer collections. Koum’s collection included a 2011 Porsche 911 GT2 RS and a 2015 Porsche 918 Spyder, both of which brought less than what we’ve seen similar models command at the Gooding & Company Amelia Island auction last year.

The lesson here is that cars that are part of a headlining collection command more money than unrelated cars offered at the same auction, because the concentration of similar cars brings a critical mass of bidders. Overall, the Brass-era cars in the Boulton collection sold for an average of 18 percent above their low estimate, while other cars offered on their own brought prices 12 percent below their low estimate.

We saw the same trend with the Youngtimer cars, which sold for 31 percent above the low estimate on average. Other cars brought prices just 9 percent higher than their low estimates. Collections often mean better returns, but that doesn’t mean every grouping will be a hit. As for the Koum collection, it actually fared worse than other offerings, bringing an average sales price 10 percent below their estimate. Other lots sold for three percent more.

The auctions in Amelia Island this year show that the market is just in a holding pattern, at least at the very top end. The situation will require collectors to adjust their expectations about returns and appreciation before things shift again. The collections that were big enough and distinctive enough to get people’s attention did well and will likely continue to be a hot part of the market in 2019.