If you lived in Italy today would you buy a new super yacht? I suspect you would not. Why? Because the taxman might see it and if he did he might pop round to ask exactly how you paid for it.
And given the size of the black economy in Italy, that might be a question you didn’t want to answer.
But it might not be just yachts you are shying away from splashing out on. And your reluctance to spend may have nothing to do with being Italian or owning Italian assets.
Across the globe there are signs that high-end buyers of luxury goods are closing their wallets. Tax is one reason. Another is that ostentatious wealth is no longer admired or accepted in the way that it was. And that’s bad news for luxury goods shares.
The Italian government takes no prisoners
If you are in any doubt about the scale of the super yacht exodus have a quick look at this report on empty marinas across Italy.
Meanwhile who’d want a new Ferrari after last year’s campaign against tax evaders – which involved tax inspectors raiding the owners of luxury cars in smart ski resorts and visiting Ferrari-owner events to check the tax returns of every single driver?
And who’d want a luxury car at all given that not only will the taxman be checking your old tax returns if he sees you in a Lamborghini, he’ll also be asking for more: new taxes mean that, owners of the €316,000 Lamborghini Aventador now pay about €8,400 a year in tax.
The answer it seems is no one: according to the blogging hedge fund manager at www.macro-man.blogspot.com the “persecution of Ferrari owners” has become so severe that they are selling them in their thousands. You can now pick one up for the “price of a new VW Polo”.
This is nasty news for Ferrari and its competitors. Not only are sales being hit by general austerity and shocking enforcement of the law, but global second hand prices are likely to be hit by the new exodus of cars from Italy (note that the number of high performance second hand cars exported from Italy tripled to 13,633 in the first five months of 2012 on numbers from auto industry group Unrae).
This is going to be “a vicious value collapse” says Macro Man.
This isn’t just an Italian theme
But it isn’t just in Italy that the luxury goods market is beginning to look a little shaky.
The market’s worriers have this week turned their attention to Chinese jewelry firm Hengdeli – the leading retailer of Swiss watches in China.
I’ve written here before about John Hempton at Bronte Capital and his idea that sales tax receipts from Hong Kong suggest falling sales of the likes of jewelry and watches in Hong Kong. Recent results from Hengdeli back up his argument.
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