Estate Jewellery: Taxman Comes to the Aid of Vintage Trade September 12, 2010 – Posted in: Press
By LUCIE GREENE
Published: Sunday, September 12, 2010
Financial Times Special Report
Hard assets have become the buzzword in the US in these hard times, as investors seek safe havens from the volatile economy.
As a result, the market for “estate” – or pre-owned – and vintage fine jewellery is experiencing a boom.
“We’ve seen a 30 per cent growth in sales in the past year,” says Tobina Kahn, vice-president of House of Kahn, a company with boutiques in Chicago and Palm Beach.
“Second-hand pieces are much cheaper than new fine jewellery and will grow at least 10 per cent in value year-on-year if they’re taken care of. Anything from the 1920s, 1930s, or 1940s, the workmanship is incredible. You couldn’t duplicate that now,” she says.
“Similarly, large stones above five carats are very popular. Customers are looking at estate jewellery not just as gift for a wife or girlfriend, but as a credible investment. They want something they can enjoy now, but also sell in five years if they want to, and for a profit.”
Terry Betteridge, owner of Betteridge Jewellers, a small chain of boutiques in the US, says: “People are buying estate jewellery to diversify their investment portfolio. My last four seven-figure sales were to people seeking tangible assets as a safer commodity, something with reliable intrinsic value.”
He agrees that price is a serious motivating factor. “A one-year-old piece will sell for half its original retail price and sustain its value or go up, depending on how rare it is.”
He says the market is partly being fuelled by bankruptcies. “My last big buy of pieces was from a bankruptcy,” he says.
“People are bargain hunting. Before, they bought new fashion fine jewellery pieces, but they’re realising the advantage of buying second hand. Anything with a name is doing well.”
At the top end of the market, vintage pieces are also increasing in value. “It’s been growing for the last 10 years. We’re seeing higher and higher prices achieved for key pieces,” says Rahul Kadakia, US head of jewellery at Christie’s. “There’s a much bigger appetite and awareness of pieces. Fifteen years ago, only masterpieces got attention. Now all vintage jewellery is viewed as art.”
Fine jewellery from the 1920s, in particular, says Mr Kadakia, is proving popular. “It was one of the greatest manufacturing periods. Houses such as Cartier and Boucheron had access to some of the finest gemstones on the market at that time.
“Ten years ago, if we sold one of Cartier’s Tutti Frutti collection of 1920s pieces for £250,000 to £300,000 ($464,000) we would issue a press release. Today, the same pieces sell for in excess of £1m and it’s commonplace.”
What is more, prices are set to rise. “People know these pieces are rare and they’re holding on to them,” says Mr Kadakia.
Until recently, gold bullion and coins were preferred to jewellery as investment in the US.
The market for gold exploded in recent years, with prices reaching $1,200 an ounce, as many people were concerned about the stability of the US dollar.
But as new tax legislation comes into force, regulating the trade of gold coins and bullion, some believe the market may fizzle.
In 2012, Form 1099, part of the Internal Revenue Code, will expand to regulate all goods and services purchased from small businesses and self-employed people that exceed $600.
As part of the legislation, any time an individual sells more than $600 worth of gold to a dealer, the transaction will be reported to the IRS and subject to tax scrutiny. Sellers will also have to disclose personal information and their social security details as part of the exchange.
The amendment is intended to harvest uncollected income tax and is expected to raise more than $17bn in the next 10 years, according to the Joint Committee on Taxation, but has prompted protest from both collectors and lobbyists.
The legislation will apply to all small businesses, but the move has been dubbed the “gold tax”, thanks to public outcry from coin dealers and groups such as the Industry Council for Tangible Assets (ICTA) which say the law will disproportionately affect them.
This is because their business model requires frequently buying from other dealers and from the public. Coin collectors, meanwhile, have raised concerns about the identity theft risks of disclosing personal legal information in exchanges.
Ms Kahn says the negative publicity surrounding gold coins is already playing in estate jewellery’s favour.
“People are nervous,” she says. “There are customers who truly believe their gold coins will be confiscated, just like in the 1930s with Roosevelt.
“We’ve been inundated with calls about jewellery as an alternative since the news got out.”
Ms Kahn, concludes: “It’s like we always tell people: Estate fine jewellery is a gift from the past that will keep giving in future.”