RESIDENTIAL RESEARCH LIVING THE DREAM GLOBAL VINEYARD INDEX 2014 INDEX RESULTS: MARKET FOCUS: INVESTMENT: NEW WORLD ON TOP FRANCE AND ITALY WINE V VINE 2 KEY FINDINGS NEW WORLD ON TOP Our Global Vineyard Index records another year of solid Index: The price of a lifestyle growth in vineyard values, with wine-making regions in vineyard increased by 4.5% on average in the year to June 2014, the US and New Zealand leading the rankings. down from 6.8% last year Vineyards are increasingly seen by Knight Frank’s Global Vineyard Index Top performer: Sonoma County the world’s wealthy as a means of tracks the change in the price of ‘lifestyle’ in the US recorded the strongest broadening their property portfolio whilst or ‘boutique’ vineyards, our definition increase in vineyard prices year- providing an opportunity to learn and excludes small “hobby” producers and on-year, rising by 17.9% explore a new industry or passion. But larger commercial enterprises. aside from wine’s profitability what return Vineyards falling within our definition Buyers: Asian buyers are looking can a vineyard provide? usually comprise 2-15 hectares of vines beyond Bordeaux to the US, Italy, New Zealand and Australia THE KNIGHT FRANK GLOBAL VINEYARD INDEX France and Italy are still top of Q2 2014 buyers’ wish lists Lifestyle vineyard , some regions Wine region Typical property requirement Grape Varieties* % annual price change such as Piedmont have seen VINEYARD Pinot Noir. Chardonnay, SONOMA Californian Ranch style property with VALUES prices decline creating potential swimming pool Cabernet Sauvignon, COUNTY, US Zinfandel, Syrah, Viognier 17.9% % change to buying opportunities Q2 2013 Built in last 20 years, 3-5 bedrooms, good Sauvignon Blanc, HAWKES BAY, Chardonnay, Pinot Gris, NEW ZEALAND quality kitchen, outdoor living area 17.6% Investment: Vine (up by 4.5%) Merlot, Shiraz outperformed wine (up by 3%) in BAROSSA, Top quality modern residence with guest Shiraz, the year to June but both were AUSTRALIA accommodation Cabernet Sauvignon 14.0% eclipsed by classic cars MARLBOROUGH, A 4-5 bedroom residence in good condition with Sauvignon Blanc, NEW ZEALAND accommodation for vineyard staff/managers Pinot Noir 13.3% Rural property, 4+ bedrooms, with strong Chianti Classico, CHIANTI, architecture, with a cellar and a large Sangiovese, Trebbiano ITALY swimming pool 12.0% Cabernet Sauvignon, NAPA VALLEY, Modernised “farmhouse” with additional land Malbec, Merlot, Cabernet US (either for horses or additional vines) Franc, Zinfandel, Syrah 11.1% THE RHÔNE Classic 18th century chateau with a Grenache, Syrah, Marsanne, VALLEY, FRANCE swimming pool and outbuildings Roussane and Viognier 5.6% BRUNELLO, Period property with 4+ bedrooms, good gardens Sangiovese ITALY with swimming pool and potential for a B&B 4.0% Merlot, Cabernet Sauvignon, BORDEAUX, Traditional stone house/chateau-style, gardens, proximity to city and transport links Cabernet Franc, Sauvignon 0.0% FRANCE Blanc, Semillon BURGUNDY, A 4+ bedroom property with secondary Pinot Noir, Chardonnay, FRANCE accommodation for visitors/staff Gamay and Aligoté 0.0% A modernised colonial-style property. If no MENDOZA, property on site a bespoke luxury home is Malbec, “ Sonoma County in ARGENTINA usually built Cabernet Sauvignon 0.0% the US recorded the PIEDMONT, Renovated farmhouse with privacy and at least Metodo Classico strongest price growth ITALY 3-4 beds -8.0% Well positioned properties with excellent views. Cabernet Sauvignon, Shiraz, with vineyard values STELLENBOSCH, Style of house is not as important as position SOUTH AFRICA Merlot, Sauvignon Blanc, -10.0% rising by 17.9% in the and views Chenin Blanc, Chardonnay Carmenere, Cabernet Self-build property of bespoke design often of 12 months to June.” COLCHAGUA Sauvignon, Merlot, Malbec, -14.0% VALLEY, CHILE colonial style Syrah **most common, not an exhaustive list Source: See back page GLOBAL VINEYARD INDEX 3 RESIDENTIAL RESEARCH with a detached family residence on the ‘Down under’ on top estate and, on occasion, outbuildings including a winery or bottling plant. These Alongside Sonoma County, the index’s ‘lifestyle’ vineyards need to do more than antipodean markets performed strongly just ‘wash their face’ instead they must with Hawkes Bay, Marlborough and produce an annual return, not simply a few Barossa Valley recording price growth bottles for family and friends. of 17.6%, 14% and 13.3% respectively over the 12-month period. In Knight Frank’s experience lifestyle vineyards are acquired by a mix of buyers, The economies of both New Zealand and some are purchased as an early retirement Australia are going through a buoyant 4.5% project by wealthy individuals in their late phase with GDP growth estimated to forties or early fifties, keen to embrace a reach 3.5% and 2.6% respectively this THE AVERAGE CHANGE ‘hands-on’ approach and with the capital year according to the OECD. Interest OF THE PRICE OF A LIFE- to fund it. Others are purchased as holiday from international buyers is also STYLE VINEYARD IN THE homes which are visited three or more strengthening, in particular from China, YEAR TO JUNE 2014 times each year, with a manager employed the US and France, and global demand to oversee the day-to-day running of the for Sauvignon Blanc and Pinot Noir estate, including both production and sales. is swelling. Now in its third year, Knight Frank’s Global Back in Europe, vineyard prices in Chianti Vineyard Index covers 14 key wine-making increased the most, by 12% in the year regions worldwide, covering both the to June, followed by The Rhône Valley world’s most established ‘old world’ markets which saw prices accelerate by 5.6% such as Bordeaux and Chianti as well as over the same period. Both markets tick instead to Provence, Languedoc and newer regions such as Colchagua Valley in many boxes on buyers’ wishlists in terms The Rhône Valley where there is greater Chile and Mendoza in Argentina. of views, landscape and property type choice and they are within easy reach of (modernised farmhouses that retain their the Cote d’Azur. architectural value) and crucially both Index results The weakest-performing markets were regions are easily accessible. On average the value of vineyards covered Piedmont in Italy, Stellenbosch in South by the Knight Frank Global Vineyard Index France’s most favoured wine-making Africa and Colchagua in Chile. Here, price rose by 4.5% in the 12 months to June regions, Bordeaux and Burgundy, saw growth fell into negative territory, declining 2014, slipping slightly from the 6.3% rate prices hold firm year-on-year. Although by 8%, 10% and 14% respectively on of growth recorded a year earlier. The slight demand varies significantly from one an annual basis. Local agents report dip in performance can be explained by AOP in France to another, the dominance that global economic sentiment has had the lower rates of growth amongst the top of large commercial setups limits the a bearing on buyer confidence and the performing regions which in 2013 were in opportunities for lifestyle vineyard owners availability of finance is tight. excess of 25%. in both these regions, with some looking The price falls in the Western Cape Despite the slower rate of growth, the are attributable to strong harvests and proportion of wine regions that recorded FIGURE 1 an oversupply of grapes. This has positive price growth increased from 60% Price change by world region meant sales prices have failed to stay in 2013 to 79% in 2014. 12 months to June 2014 ahead of input costs making it a less The global picture hides some notable profitable venture. standout performances, particularly In Chile, the economy is slowing but amongst wine-making regions in ‘new capital is still flowing into agricultural and world’ locations such as the US, New lifestyle investments. We expect demand Zealand and Argentina. The average price NEW WORLD to strengthen in 2015 with more buyers of a lifestyle vineyard in the new world rose interested in fractional ownership of by 6.2% year-on-year compared to only managed vineyards. 2.3% in the established markets of the old 6.2% world (figure 1). In Italy, there is a clear demarcation Sonoma County in the US, often between the best and the rest. Although overshadowed by neighbouring Napa Valley, vineyard prices in Piedmont have slipped, OLD WORLD recorded the strongest appreciation with the area of Barolo (within Piedmont) is vineyard values rising by 17.9% in the 12 experiencing real growth. Demand is months to June. However, it is worth noting 2.3% focussed on those areas where there is a that prices in Sonoma County’s Russian quality product with a strong reputation. River Valley remain 50%-65% below those Other areas in Italy which outperform in Napa Valley’s key markets of Rutherford their wider markets include Brunello and Howell Mountain. Source: Knight Frank Residential Research and Prosecco. 4 GLOBAL TRENDS The index results give us an insight into the latest price performance of lifestyle vineyards but how is wine production and consumption faring at a global level? The Organisation of Vine and Wine estimates that the world’s population FIGURE 2 consumed around 239 millions hectolitres Supply and demand (million hectolitres) of wine in 2013 but produced over 279 GLOBAL PRODUCTION GLOBAL CONSUMPTION 300 million hectolitres (figure 2). The margin narrowed in 2012 when the low harvest 290 in the northern hemisphere (particularly in 280 Italy and Spain) led to a rise in prices of 270 €2.62 per litre. 260 250 240 Demand 230 Global consumption has remained largely 220 stable since 2009 although there are 210 fluctuations at a country and regional 200 level. China and Europe are consuming 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 less wine (down by 3.8% and 2.4% Source: OIV respectively between 2012 and 2013) but this is being offset by countries such financial markets, but also their growing as Argentina, the US and Brazil where propensity to own a mixed property Supply consumption is on the rise.