In Part One of our Bordeaux vineyard market analysis we looked at an overview of the past 15 or so years and summarized the market changes that we have observed. While we used the SAFER’s averages to offer some opinions, in this Part Two of our Bordeaux vineyard market analysis we will drill down on today’s Bordeaux vineyard market and then forecast where we see the market going from here.
Whilst the SAFER numbers are helpful for the overall market trend they need some closer inspection and local knowledge to really comprehend what is happening in the market place. Furthermore as market leaders in the Bordeaux vineyard business, Maxwell-Storrie-Baynes see what is happening on a daily basis and can refine the information so that the trends and specific segments of the market can be better understood.
The SAFER reports that in 2012, 3,434 hectares of vines were sold representing 2.72% of the total Bordeaux vineyard stock. The sales came from 712 transactions up 12 from 2011 when the number of vineyard transactions was 700 (and up 100 from 2010 when it was 612 transactions in total). Senior members of the SAFER confirmed to Maxwell-Storrie-Baynes that the total number of vineyard chateau properties within the Bordeaux AOC sold in 2012 was 37. What this tells us is that 675 vineyard transactions in 2012 were smaller transactions most of which would have been just parcels of vines. This might be one or two hectares traded between neighbours or to augment an existing chateau’s estate as part of a consolidation. The vast majority of these transactions will be French domestic buyers and sellers and most will happen without market advisors.
Two markets:there are two distinct markets therefore, the wholesale vineyard market where parcels are traded, mainly between local investors and the “retail market” where Chateaux properties are traded through vineyard market experts such as Maxwell-Storrie-Baynes exclusive affiliates of Christie’s International Real Estate. Being averages, the SAFER’s numbers are heavily skewed by the wholesale market, so, when we see a market price for Red Bordeaux Superieur at €15,000 per hectare we must recognize that this number is based on the average of 712 transactions, 675 of which are wholesale trades of relatively small areas. The danger in misinterpreting the SAFER numbers can be most clearly seen in the small appellations such as Pauillac where the average price per hectare in 2012 was €2,000,000.00. The Pauillac AOC is only 1,200 hectares in size and it is heavily dominated by classified growths – what we would call the retail market for a fully operational chateau estate. Therefore if even just one sale takes place in Pauillac in any given year the average will be very heavily influenced by that sale. This pattern is equally skewed in Pomerol, Pessac Leognan, Saint Julien and Margaux all of which are under 1,500 hectares. St Emilion at 5,500 hectares will start to see the effects of parcel trading, or the wholesale market and so it is no surprise that the average for AOC St Emilion is €200,000 for 2012.
In stark contrast would be the AOC Bordeaux Superieur: Red, the wine category/classification that makes up the largest proportion of the +/- 120,000 hectares of the Bordeaux vineyard region. For Bordeaux Superieur the average price per hectare is €15,000 – more or less unchanged from the year before. However, of great significance is the fact that the vast majority of the transactions would have been wholesale and therefore would not have traded with Vat-house, brands, business, equipment and chateaux buildings. The average price per hectare is therefore pulled down significantly by the wholesale market transactions that form the bulk of the trade. In reality a good quality Bordeaux Supérieur Chateau is now trading for €23,000 to €25,000 per hectare.
At Maxwell-Storrie-Baynes we are market leaders of the annual “retail” vineyard transactions in Bordeaux and we are the first to know about the transactions that we do not handle directly. It is our view that while the wholesale market for parcels of Bordeaux Superieur will continue to trade around €15,000 per hectare for the foreseeable future, the retail market has now moved off the bottom of the market that we saw in 2010/2011. In no small measure this is due to the Chinese buyers that are specifically seeking Chateaux properties and in most cases non-classified vineyards. This has stabilized the Bordeaux vineyard market supporting per hectare prices. For example in 2011 there were 35 chateaux properties sold in the whole region – 60% were sold to Chinese buyers. In 2012 of the 37 sold in total, 62% went to Chinese buyers.
Forecast.We forecast that the trade in wholesale parcels will continue at a fairly stable level – there is no reason to believe this will change although we do expect to see more and more consolidation as the small parcels sell to larger estates that have established markets and brand names. The supply of parcels remains large in Bordeaux which suggests that the average price for a hectare outside of the famous appellations is likely to remain at around €15,000 per hectare. By contrast we have seen the supply of Bordeaux Chateaux drop over the past 30 months with an average of more than one per month selling to a Chinese buyer. At current enquiry rates we expect this trend to continue which means that for a Bordeaux chateau property we anticipate prices will continue to rise steadily running at a rate per hectare of between a third and a half higher than the (SAFER) average for the larger AOC regions. Following this rule of thumb for example, a Bordeaux Superieur will be trading in 2013 for €25,000, a St Emilion Grand Cru will trade at between €300,000-€400,000 and Cotes de Bordeaux Castillon at €40,000 per hectare.