Antiques make solid investment

Buying antique furniture offers the twin benefits of enjoying both fine craftsmanship and value appreciation.

What makes these pieces investment worthy is scarcity—they don’t make them anymore, says Neil Herbert, owner of Neil Herbert Fine Woodworking in Oakville, Ont.

“People buying antique furniture [are investing in] something that’s going to be worth [more later], or will hold its value.”

Anyone who wants to invest in this area must do extensive research, and Herbert says attending auctions are a great way to learn about pieces and periods, and get a sense for market prices.

It’s also important to hit the right stage of the market cycle. “If you’re getting into antiques to invest, now is the best time: [when] the economy is slow.”

With proper care and timing, Herbert’s seen investors double their money at time of sale.

The Annual Furniture Index, compiled by England’s Antique Collectors’ Club, stood at 2,505 in 2010 (up from 100 in 1968, its year of inception). The AFI is based on a blend of retail and auction prices for 1,400 typical pieces of furniture from seven different periods.

Facts and figures

All seven of the antique categories in England’s Annual Furniture Index fell in 2010:

• Oak: -12%
• Country: -10%
• Regency: -9%
• Early Victorian: -8%
• Walnut: -7%
• Early Mahogany: -6%
• Late Mahogany: -6%

Historically, Oak and Country antiques have been the strongest categories since the AFI’s inception in 1968. Post-1770 mahogany furniture now carries the lowest of all index figures, 1,860 (2010 average: 2,505). Experts say these dismal figures suggest a buying opportunity.

Further, buying antiques at auction is “like gambling; it’s a rush,” he says. “When you’re [there] you really want it—[then you realize] all of a sudden you’ve spent too much.”

So set a spending limit and determine desired pieces beforehand.

In terms of asset allocation, one Ontario- based financial advisor suggests antiques make up no more than 5% of a client’s net worth. For the very wealthy, 2% is a more reasonable number.

Most of Herbert’s clients buy and hold because they’re partial to the pieces, not just the investment. That’s smart, because according to the New England Antiques Journal, selling costs can run at least 30% of the value of the antique.

Buying antique furniture is not only about capital preservation. It’s also about the legacy owners want to leave behind. Himself a beneficiary of inherited pieces, Herbert is now buying heirlooms for his family.

And although he doesn’t advise borrowing money to invest in this asset class, he’s done it himself.

Buying & Selling Tips

• Get an independent, expert opinion. Formal appraisals cost as much as $400.
• Auctions can ensure sale, but not necessarily the price you want; selling on consignment can ensure price but not sale
• If you need to sell quickly, an auction is your best bet.
• Research your auctioneer’s reputation and standards before entering a piece.
• The Annual Furniture Index (UK) recorded an 8% drop during 2010, the largest-ever 12-month drop in the AFI in four decades. So if you’re selling now, be prepared to lose in this down market.

Courtesy: Antiques Roadshow Insider; Antiques Trade Gazette

Hassle Factor

• The investment is illiquid, and usually long-term.
• Many pieces need restoration or repair. Restoration work costs at least $70 an hour.
• Pieces are susceptible to rot, mold and insect infestations.
• Home contents insurance may not cover the entire value of antique furniture, so separate policies must be taken out.
• Can be difficult to tell a genuine period piece from a high-quality reproduction without an appraisal.

That said, the AFI reached its all-time high of 3,575 in 2002, and the 2010 figure represents a record 8% drop from the 2009 index.