Air cooled Porsches: superannuation in the bank vs bubble boy

[550Spyder]

Putting aside for a moment all normal logic (I.e how can a an unrestored 3.2 Carrera with 300,000 km on the clock and no working air-conditioning be worth more than a 997 4S with 100,000km).... I am trying to work out how 'real and sustained' the latest run on air cooled pricing is. 

The facts are that certain cars moved from 'cheap and everyman' affordable to hardcore collector space only. Some examples are Ferrari Dino's which were once hugely unloved sub $50k propositions but now are $400k ++.  Other cars that have gone northwards in value and never came back include Austin Healey 3 litres,  jaguar XK150's, 1960 Mercedes 190 coupes, the original BMW M3 lhd coupes. 

On the other hand there are some collectables that tend to ride a price roller-coaster of boom and bust. The E type Jags have huge differences in pricing dependant on where they are on their pricing cycle. 

What is the consensus on air cooled 911 prices? Temporary blip or the start of a long and sustained pricing run?

[LeeM]

Long and sustained is my uneducated guess for anything air cooled. 

 Old and air cooled was an affordable entry into Porsche ownership 2.5 years ago for plebs like me, who has been a bonkers fan of them for 35 years,  yet thought he could never afford one.

If I wanted to buy one now, or in the near future? Sadly, no chance

 Oh, and I'm a Porsche enthusiast, not a collector. There is a difference

 

[turboT]

Not making them anymore - I'm with Lee. I only got my first air-cooled 6 months ago...just in time

[KGB]

Cheap money has them at well above a long term trend, which is for sustained value growth.   Correction inevitably WTSHTF.  Nature doesn't allow this stuff to happen for too long.

[Coastr]

Look at the shape of the price curves from Hagertys.  Compare it with dotcom stocks, tokyo real estate, tulip bulbs - whatever.  It's a bubble.

We are now at the point where supply has disappeared.  That's because sellers are holding off hoping for higher and higher prices and are scared of selling too early and missing out, and are greedy for higher prices as in their mind they convert the Porsche from a valued possession to a sackful of cash waiting to be spent on other things.   Buyers are fearful of higher prices and buy anything for fear of missing out.

The first thing to realise is that it's not just air-cooled Porsches.  Classic cars of all stripes have gone up steeply in price in the last few years.  Longhood cars (and now Turbos) have been particular market darlings, but just call them the Cisco stocks of this particular bubble.

The second thing to realise is that the rise in classic cars is also reflected in lots of other 'collectible' asset classes like art.  What we have is newly printed money starting to find it's way into hard assets.  Central banks make the money, the banks get first bite at it to get rid of their bad loans, then the money gradually flows into the stock market (pushing it up) then from there into other things like art, stamps, classic cars - whatever.  This is just the result of a fixed amount of stuff (classic cars) getting chased by a larger amount of currency.  Result = higher prices.

The third thing is that this has all happened before.   The Austin Healey mentioned above is just starting to re-scale the price heights seen in 1989/90.  At the time prices went nuts and people were saying 'it's all blue sky from here'.   While technically true in that, 25 years later, you would see return on the cars, in reality a market reinvestment fund would have kicked it's ass 5 ways to Tuesday in comparison.

I've read some of the 'defense' articles and a lot of them concentrate how people aren't using borrowed money.  Well, maybe technically that is true in that you don't use the vehicle as security, but if you have any sort of mortgage like I do then realistically the car is borrowed money even if you paid cash for it.  Because if the time comes when the loan needs to be paid, the car goes on sale.  It doesn't take much to tip the market.  If there was a big slowdown in property prices, or a stock market crash and next week 15 SCs got listed on the market, prices would be softer, no doubt.  The first 5 would clear quickly then things would start to slow.  The same would happen even with a set of 1970 Ts and Es.

What is likely to happen:

- more long time owners are likely to sell into the market and soak up demand

- more newer owners are going to find the reality of owning old cars with needs, and sell if prices even level

- cars will go back to sitting for weeks/months 

- prices will level, and in some cases fall

Some models (long hood RS and S) are never going to go back to where they were, but could easily see 20-30% lower prices.

Common cars like SC and 3.2s and mid-years are likely to stick at a price level where they were for a long time.

It's not going to be a case where you're going to see price increases of 10-20% per year for year after year.  If you do even the slightest back-of-the-napkin maths you'll see that's impossible.

What I am not going to predict is when this happens.  

Warren Buffett:

"The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.
"

Personally the whole thing annoys me as I got into a Porsche for the driving and owning, all I ever wanted was for it to not depreciate away like other cars.  But the illiquidity of the market makes selling one and buying a different one a risky and difficult proposition.

[clutch-monkey]

Look at the shape of the price curves from Hagertys.  Compare it with dotcom stocks, tokyo real estate, tulip bulbs - whatever.  It's a bubble.

We are now at the point where supply has disappeared.  That's because sellers are holding off hoping for higher and higher prices and are scared of selling too early and missing out, and are greedy for higher prices as in their mind they convert the Porsche from a valued possession to a sackful of cash waiting to be spent on other things.   Buyers are fearful of higher prices and buy anything for fear of missing out.

agree! and this bit in particular- people are caught up in a buying frenzy for anything available. spending crazy money on cars that just aren't good value.

me, i'm happy to dabble in other marques, and wait for the bubble to burst. 

[9er]

I agree with almost all that Mr. Coastr has to say although I am far too thick to articulate it that well.

However, I think if we take the early cars in isolation, because of there being such limited numbers of them, I can't ever see current owners selling into the market and meeting the (huge?) demand.

Your second point is interesting also, I would suggest that historically at least a third of people who buy longhood cars become disillusioned because they aren't the easiest thing to own and drive. These owners would move them on, however I think most of the good cars that are selling lately are being purchased by a different demographic (people new to classic Porsches)  and probably wont be driven anyway, just stored, because they read an article that said pre 73 Porsche 911 was the best investment.

 

 

 

[edgy]

To me.. the models that are truly unique will sustain. I think there will be an adjustment at some point too! 

Some of the stories I hear lately in this frenzy are ridiculous and buyers are certainly acting irrational & sellers/dealers are being unscrupulous bastards in a lot of cases .... 

Yes it is nice to know your money is safe in your Porsche but this whole price boom just puts me off classic Porsche... its now started with late model GT cars too. 

 

 

[LeeM]

I'm just dark on myself for not buying a nice black UK 911 for $18k 2 years ago! 

Damn it

[Dusty]

"It's different this time"

[ByronBayChris]

"It's different this time"

The Sunshine Coast makes people cynical !!!

[911barber]

I think there's some merit to what all you guys predict, at the end of the day the numbers for au delivered a/c cars is small, real small, year after year the numbers delivered are only double digits or thereabouts,  that fact alone makes me predict it's going to be better than a term deposit, any day.... If I'm wrong I can still enjoy opening the garage door and having my breath taken away from me, every time, and you  can't put a monetary figure on that. :-)

Of late I've also changed my uneducated view of the imported examples, a good honest car is worth the effort, a % discount is a bonus, it might have to be the choice for another 911 in my garage at some point. In the mean time it's happy days. 

[Coastr]

The Sunshine Coast makes people cynical !!!

Must be the continuous boom/bust real estate cycles the coast people get subject to.  Maybe Byron is immune due to the planning controls choking supply.

Actually the reason I'm so cynical is because I like to read books on economics history and theory in my spare time.  (sure helps to get to sleep!)  This is a story that has been told before, many times.

[ByronBayChris]

Must be the continuous boom/bust real estate cycles the coast people get subject to.  Maybe Byron is immune due to the planning controls choking supply.

Actually the reason I'm so cynical is because I like to read books on economics history and theory in my spare time.  (sure helps to get to sleep!)  This is a story that has been told before, many times.

byron property. Has been stagnant for 12 years. No boom and no bust....well, a bust in the fact that city prices have more than doubled whereas we have not moved.

And I also see the cycles. 

[Coastr]

So Byron property is like air cooled Porsches from 1998 - 2013.   Things stay busted a lot longer than they stay boomed.

[tazzieman]

There are other classic Porsches where the value and price are quite reasonable 

Once you get the must-have-an-air-cooled-911 monkey off your back!

And as has been stated , plenty of other classic brands to explore.

[KGB]

You almost said 928 didn't you!

[twood]

 

Of late I've also changed my uneducated view of the imported examples, a good honest car is worth the effort, a % discount is a bonus, it might have to be the choice for another 911 in my garage at some point. In the mean time it's happy days. 

Well said. In my biased view is I would rather a good imported car then an Aust delivered car in dubious condition. It is about the car not the where it was delivered because ultimately they all came from the same factory.

[Dreamr]

Well said. In my biased view is I would rather a good imported car then an Aust delivered car in dubious condition. It is about the car not the where it was delivered because ultimately they all came from the same factory.

It's funny you know ..... that statement of coming from the same factory has been resonated on this forum hundreds of time and for years upon years .....

Yet ..... Aussie delivered still sells quicker and always gets higher prices.

Me thinks there must be something in it ...

[tazzieman]

Why aren't savvy investment companies buying used Porsches?

[Coastr]

It's funny you know ..... that statement of coming from the same factory has been resonated on this forum hundreds of time and for years upon years .....

Yet ..... Aussie delivered still sells quicker and always gets higher prices.

Me thinks there must be something in it ...

A lot of Australian delivered cars are in better condition compared to imports because they always cost more to start with, so they stayed in the hands of people with the funds to keep them.  It's not a complete rule, though, because I have seen some very rough Aust delivered cars that I wouldn't buy.  I have seen worse imports, though.  A lot of imports come in with no documentation or history, so it's a crapshoot to buy them. 

It's about condition for me.  As noted already, once cars cross a tipping point buyers don't care if they are imported or not.  This is an invisible line that moves with the market.

The main reason people pay more for Australian delivered cars is because people pay more for Australian delivered cars.  It's a self perpetuating cycle.

[911barber]

Why aren't savvy investment companies buying used Porsches?

maybe because they dont have the garage space?

 

[Coastr]

Why aren't savvy investment companies buying used Porsches?

Do we know they are not?

[tazzieman]

Do we know they are not?

Ultra high end maybe. Even loose collectives .

Investment companies would quite reasonably consider taxes , maintenance , insurance & and storage. Emotion does not cloud the judgement.

[Coastr]

I should have added an emoticon.  Of course any serious investment co would look at boring things like earnings and liquidity.  

I bet some enterprising syndicates have popped up though.  Switched out of racehorses for a season.