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08.12.20

Whisky Investments Prove a Safer Bet Than Property

For a long time, property has been seen as a safe and sensible investment. Putting your money into ‘bricks and mortar’ is always encouraged, even at the very basic level of buying your own home rather than renting. When you can afford to do more than that, investing in property is seen as a sign that you’re a ‘real’ investor and this view was borne out by a survey earlier this year.

Hargreaves Lansdown asked people about their attitudes to investing and more than a third of people said they would consider property investments. “Our love affair with property knows no bounds, so it’s no shock that when people are prepared to invest, they favour property over anything else,” said Sarah Coles, personal finance analyst at Hargreaves Lansdown.

Investing in a Pandemic: Whisky Vs Property

However, property investing isn’t as straightforward as its popularity might suggest. “Homeowners tend to think they understand property, but investing in it is very different to owning your own home, and comes with substantial costs and risks,” she said. Those risks have never been more clear cut than they have been since the outbreak of the Covid-19 pandemic.

Property investments have been hugely affected by the shifts in how we are all living our lives in the midst of lockdowns. City centres that were previous buzzing hives of activity have been emptied, shops have been closed temporarily or have gone out of business and while offices have stood empty as a whole, workforce gets used to working from home.

This downturn in economic activity has impacted on the ability of both individuals and businesses to pay their rent to landlords. In the first UK lockdown the Government relaxed the rules on late payments of rent and just 14% of the £2.5bn due from retail tenants was paid on time.

While vaccines could promise the end of Covid-19, the way we work, shop and socialise will have all been impacted this year and the value of property is not exempt. Things that might have seemed like safe bets in 2019 certainly won’t be when it comes to 2021.

So, for people who aimed to make money as landlords, or those who put their money into any type of real estate investment for that matter, 2020 will have been a tough reality check. It’s no wonder that alternative investments have been soaring in popularity, amongst them Scotch whisky.

Is Whisky a Covid Proof Investment?

Very few areas of modern life have been unaffected by Covid-19, including whisky. Distilleries in Scotland were forced to close when the country went into lockdown in March 2020, some pivoting to donate their alcohol to be used to make hand sanitiser, others started to produce it themselves. While they were able to re-open and resume whisky production eventually, there will have been an impact from the disruption, but whisky produced in 2020 could be the most valuable batch in history due to reduced quantity.

Meanwhile, global exports of whisky, which are so key to its continued success, were badly affected in the first half of the year with a drop of 30% compared to the year before. However, with exports having grown by 4.4% in 2019 to a total value of £4.91 billion, the industry was in good health before the crisis and there is no reason to think that will change after it.

Whisky is seen as a safe investment because it’s a physical product that will retain its value without being impacted by changes in the financial markets in the same manner that property investments can be. There are also fewer variables that can affect whisky, which cannot suddenly drop in value because of societal factors in the same way that a property investment can.

Whisky Gets Better with Age

Vintage whiskies can only gain in value as they age, which is rarely the case for most property investments, and there is only a finite amount of them because they were created decades ago. New whiskies are produced all the time, but these don’t replace the older ones and don’t offer shiny new technologies that can affect the value of other investments.

Investing in anything requires some research to be done to make it worthwhile and this is certainly true for whisky. You need to understand which distilleries are most popular with investors and what factors can shift a good investment to a great one. However, there’s far more research required for investing in property, which requires understanding of the many factors that can affect the value of your investment.

With whisky, even if the worst comes to the worst and the value of your investment drops, at least you still have the whisky, whereas property investments that go wrong can leave you with your fingers badly burned and without even the consolation of some whisky to drink. As we’ve seen this year, property really does come with substantial risks, so why not consider taking an alternative investment route?