Investing In Real Estate Vs Wine (Performance, Volatility)

Wondering whether to invest in wine or real estate? 

Real estate and fine wine are tangible alternative investment classes that make incredible inflation hedges. However, their varying market performances, volatility, and accessibility make it a little difficult for new investors to choose between them.

Or, you could also live every wine lover’s dream by investing in a wine estate or vineyard land.

Let’s compare investing in real estate vs wine bottles, explore investing in vineyards, and find out how Vinovest makes wine investing a breeze.

Investing In Real Estate Vs Wine

Here’s a detailed comparison of investing in fine wine bottles and real estate. 

• Market Performance
• Affordability
• Liquidity
• Market Volatility
• Accessibility
• Performance Against Inflation

1. Market Performance

As of the first quarter of 2021, the 25-year return for private commercial real estate investment averaged 10.3%. 

Additionally, Real Estate Investment Trusts (REITs), like the Real Estate Select Sector Fund, generated 22.9% returns over the past year.

On the other hand, the wine industry has generated 13.6% annual returns over the last 15 years. In fact, as a wine investor, you can expect steady returns of 6%-15% on your investment portfolio in the long run.

And it’s not just physical wine bottles that perform well. In 2021, Constellation Brands' wine stocks saw a price increase of 14.57%, and Diageo’s wine stocks price grew by 38.6%.

Furthermore, in 2021, the Liv-ex 100 index (which tracks the price performance of the 100 most-traded wines in the secondary market) reached an all-time high of 372% since its inception.

2. Affordability

An asset like a house isn’t cheap, and real estate investments generally require a lot of capital upfront.

If you buy a house today, you'll have to pay for the property, real estate agents, property taxes, renovations, and also find suitable buyers.

While you can mitigate some of these costs through a mortgage, most mortgages require a 20% to 25% down payment on the property. 

Of course, you could always rent out your property, but that involves maintenance costs and going through the trouble of finding a trustworthy renter.

A cheaper way to involve yourself in real estate investing is to purchase REITs. REITs allow you to earn dividends from multiple real estate investments without buying, managing, or financing a property.

In contrast, fine wine investments have a reputation for being for the uber-wealthy. However, since fine wines are produced in different regions with different grapes, it’s easy to find an investment-worthy bottle that fits into your budget. 

Besides expensive labels like Romanee Conti or Dom Perignon that sell for thousands of dollars, you can also buy a bottle of investment-grade wine for less than $100 and potentially sell it for a good profit. 

For example, a bottle of 2019 Chateau Pontet-Canet rose from $89 to $154 between 2020 and 2022 - that's a 74% increase in 2 years.

Furthermore, you can buy en primeur wines (wine future) that are still in the barrel. Wine future allows you to get your hands on an investment grade wine below market price.

3. Liquidity

Real estate is a long-term illiquid investment.

The real estate market has long transaction times, significant transaction costs, and extended holding periods.

Furthermore, background checks are often required before buying a property, so it can take months to sell your house.

When it comes to fine wine, the market can be a bit rigid if you buy and sell wines yourself. But, this illiquidity benefits you during bear markets by protecting you from panic selling.

However, there are ever-growing routes to trading efficiency in the fine wine market. Trade exchanges and fine wine investment companies allow investors to buy and sell bottles at any time.

For instance, a trusted wine investment company likeVinovest has wine experts that continuously monitor your portfolio’s performance and help you sell at the right time and place.

Furthermore, some wines are more liquid than others. Bordeaux blue-chip wines are the most liquid because the supply supports high levels of trade in the secondary market. For example, Lafite Rothschild cult wines were the most traded by value and second by volume on the Liv-ex wine exchange in 2021.

On the other hand, Burgundy wines are considered a low-supply investment. They don’t enjoy the liquidity levels of Bordeaux, but returns are fantastic. A single wine bottle of 1945 Domaine Romanee Conti sold for over $550,000 at the Sotheby’s 2018 Auction.

4. Market Volatility

A volatile asset class often provides better returns but leaves you susceptible to market turmoil.

This is well illustrated by the volatility in the real estate investing market - which has shaped the global economy with its ebbs and flows.

Remember the 2008 financial crisis?

Real estate prices soared as banks loaned out money to risky investors at unprecedented levels. When the investors couldn't repay their loans, markets crashed, and housing prices fell over 15% in 2008 alone. 

On the other hand, the wine industry exhibits incredible market stability because of its low correlation with global events. That’s why when other markets face volatility, the fine wine market holds firm.

Furthermore, the volatility of an investment grade wine bottle decreases over time because fine wines appreciate with age. So, as an investor, your investment in this real asset becomes more secure the longer you hold it.

5. Accessibility

Getting into real estate investing can be expensive, but there are several ways to invest in this real asset other than buying a house.

• Purchase commercial real estate
• Invest in Real Estate Investment Trusts
• Purchase ETFs and mutual funds that invest in real estate
• Put money in Real Estate Investment Groups

But what about fine wine investments? 

Your fine wine investing journey can begin in multiple ways, perfect for novice and accredited investors alike. You don’t have to be a Master Sommelier to put money into this alternative investment.

Here’s how you can get started:

• Buy, store, and sell bottles yourself
• Bid in-person or online at various wine auctions around the world
• Buy and sell wines through brokers
• Invest in wine stocks and bonds like Constellation Brands or Diageo
• Buy and sell wines through a wine investment company

Investing in wine yourself can be tricky.

You’ll have to find a trustworthy and reputable broker to buy and sell wines for you. You’ll also have to find a temperature and humidity-controlled wine cellar for your wine collection.

Luckily, a trusted fine wine investment company like Vinovest offers the easiest way to build a portfolio of investment grade wine bottles.

For as little as $1,000, Vinovest’s advanced AI-based algorithm will compare thousands of wines to create a portfolio for you. Its Master Sommeliers and wine experts will use their experience to hand-select the wines that best reflect your investment preferences. 

It will even store your wines in temperature-controlled bonded warehouses with optimal light, humidity, and vibrations.

6. Performance Against Inflation

Real estate acts as an inflation hedge because as inflation increases, so do real estate prices.

That’s why your landlord can charge you more rent each year.

Interestingly, fine wine prices also increase with inflation. So, if you have a fine wine collection in your wine cellar and inflation increases, you’ll be able to sell your wine for more.

Furthermore, fine wine doesn’t pay dividends. So, as inflation reduces the appeal of dividends paid out by REITs, fine wine remains unaffected.

Now that we’ve compared investing in real estate and fine wine, let’s meet in the middle and look at investing in wine real estate. 

Investing In Wine Real Estate

There are three main ways to invest in wine real estate:

• Purchase vineyard funds
• Spend your money on buying vineyard land
• Buy a home in wine country

If you’re looking for a real estate investment in wine country, here are some places to go for.

• California, USA: California is one of the most prestigious wine regions in North America and produces some amazing cult wines.You’ll find some excellentreal estate options in the St Helena wine region in Napa Valley and the Santa Rosa region in Sonoma County - both within close proximity to San Fransico. 

In Napa Valley’s St Helena and Sonoma’s Santa Rosa, you’ll have the option to buy a house, but you can also purchase shares in a property - giving you co-ownership rights without paying for an entire property.

• Mendoza, Argentina: Real estate prices in Mendoza have dropped 10%-30% in the last 2 years due to the pandemic - giving investors an excellent opportunity to buy property in this wine country.
• Cape Winelands, South Africa: South Africa is becoming a popular wine region for international investors. Also, the dollar's current strength against the rand makes it an affordable wine region to invest in.
• Barossa Valley, Australia: The real estate market in the Barossa wine region has boomed since the start of the pandemic. Prices have exceeded Australian real estate agents’ expectations, and homes that used to average 3-4 months on the market are now sold in 2 weeks, 2 days, or even 2 hours.
• Sicily, Italy: A great part about buying real estate in Sicilian wine country is that foreign buyers aren’t treated differently from locals. So, a slice of the Ionian Sea and a wine lover’s paradise are just one investment away.

Now that you’ve weighed the pros and cons of all these options, it might be clear that the easiest and most stable long-term investment is fine wine.

Start Your Wine Investment Journey With Just A Few Clicks!

If you’re choosing between investing in wine bottles and real estate, the wine industry offers better long-term returns and incredible stability. But if you’re still struggling to decide, you could always invest in real estate in wine country.

Sign up with Vinovest today to begin your fine wine investment journey with help from fantastic wine experts.

Vinovest offers the easiest way to buy, store, and sell rare and authentic wines from around the world, be it North America, South America, or Asia.