Living the Dream - Global Vineyard Index 2014

Knight Frank's Global Vineyard Index records another year of solid growth in vineyard values, with wine-making regions in the US and New Zealand leading the rankings. 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?

By Knight Frank


Global Trends

The Organisation of Vine and Wine estimates that the world’s population consumed around 239 millions hectolitres of wine in 2013 but produced over 279 million hectolitres (figure 2). The margin narrowed in 2012 when the low harvest in the northern hemisphere (particularly in Italy and Spain) led to a rise in prices of €2.62 per litre.


Global consumption has remained largely stable since 2009 although there are fluctuations at a country and regional level. China and Europe are consuming less wine (down by 3.8% and 2.4% respectively between 2012 and 2013) but this is being offset by countries such as Argentina, the US and Brazil where consumption is on the rise.
So, demand looks relatively steady providing vineyard owners with a market for their end product but what about measuring the demand for the vineyards themselves?
Wealth forecasts estimate there will be 47,400 more ultra high net worth individuals (UHNWIs) in the world by 2023 (individuals with assets of more than US$30m) with Asia and Latin America seeing a high proportion of this emerging wealth.
The global financial crisis underlined not only the wealthy’s affinity with property and land, as a means of sheltering their capital from the volatility of the financial markets, but also their growing propensity to own a mixed property portfolio worldwide.
Luxury homes in global cities are still top of their list, but vineyards, ski homes and private islands are increasingly on their radar too as they see the advantages of buying a lifestyle acquisition which is capable of providing an investment return as well.
Knight Frank’s Attitudes Survey, which analyses the views of wealth advisors representing 30,000 UHNWIs, found that Latin Americans and Russians were the most interested in owning a vineyard (figure 3). Interestingly, analysis on a country by country basis revealed 45% of Chinese UHNWIs were interested in vineyard ownership.


Since 2000 the total surface area of the world covered in vines has shrunk 4%. The ‘new world’ markets, where land is more easily acquired and newly planted, is helping to offset the decline in countries such as France, Italy, Spain and Portugal where the surface area has dropped 14% overall over the same period.
This need to improve yields, along with more environmentally conscious consumers, is leading some vineyard owners to explore more sustainable practises. According to our Vineyard Survey, over 80% of respondents said they were seeing interest strengthen in those vineyards that have adopted organic, biodynamic or sustainable methods, with France and Italy leading the way.


All eyes seem to be on Asia but the buyers from the US, Switzerland and Brazil are increasingly active and looking further afield too.
The flow of vineyard buyers is an increasingly global affair but the influence of overseas buyers varies significantly from region to region, and even from village to village in France and Italy’s case.
Tuscany currently attracts the largest proportion of international buyers (60%) with some areas such as Chianti and Montalcino seeing an even higher percentage (up to 80%) due to the reputation of the local wine (figure 4).
Mendoza in Argentina, which is home to a large number of US, Canadian and also European vineyard owners, is in second place with around 50% of buyers originating from outside of Argentina.
Barossa Valley (Australia) and Bordeaux are at the other end of the spectrum with foreign purchasers accounting for only 10% of buyers. The reasons differ for this low percentage. Bordeaux’s low proportion of foreign buyers is attributable to the dominance of commercial owners and off-market domestic sales while a slump in prices (until recently) has deterred some buyers in Barossa Valley, a trend we expect to change as Asian interest strengthens. 
The presence of Asian buyers is no longer confined to just Bordeaux, our survey showed that they are increasingly active in the US, New Zealand and Australia (figure 5).
Only two or three years ago any reference to Asian buyers was synonymous with the Chinese but now it refers to a much broader mix of nationalities from Vietnamese to South Korean as well as the ubiquitous Hong Kong wine enthusiasts.
The Americans are also broadening their reach, although still active in Latin America, they are looking further afield, to Italy and also to New Zealand. Brazilians are no longer focussed solely on Chile, Argentina and the Napa Valley but are interested in Tuscany, in particular Montalcino.