Prices for young racehorses are declining at Europe's biggest auctions as the effects of the credit freeze spread into luxury markets.
Tattersalls, the world's oldest and biggest horse auctioneer, had a 4.5 percent drop in average yearling prices at a three-day auction that ended today at Newmarket, England. Goffs, Tattersalls' closest competitor and partly owned by the Aga Khan, said average prices fell 33 percent at last week's sale of the best yearlings in Ireland.
``I am not going to spend any more on racehorses until the situation on the market eases,'' Rod Lloyd, the chief executive officer of property developer Eatonfield Group Plc, said in an interview. He has spent about 300,000 pounds ($520,000) on 10 yearlings this year. Eatonfield, based in Mold, Wales, has dropped 87 percent since Jan. 1.
Before last week, prices at the Goffs premier annual sale had risen every year since 2004. The decline comes as rents for London luxury homes drop and the art market peaks. On Oct. 6, the day before the Tattersalls sale began, shares worldwide lost more than $2 trillion in value.
The sales are a gauge of confidence in a sport dominated by the likes of Sheikh Mohammed bin Rashid al-Maktoum, the ruler of Dubai, and Irish millionaires John Magnier and J.P. McManus. They're the first auctions of yearlings, horses in their second calendar year of life, since the credit crisis worsened after the collapse of Lehman Brothers Holdings Inc.
Benny Bids
The Dubai ruler, absent during the Goffs auction, was attending Tattersalls this week. Sheikh Mohammed, wearing reading glasses, watched some of the yearlings walk around the paddock yesterday as he flicked through the sales catalogue. Abba's Benny Andersson bought the most expensive yearling auctioned today, a grey colt, for 650,000 guineas ($1.2 million).
The price for yearlings is still quoted in traditional English `guineas' -- equivalent to one pound and five pence. The guinea, no longer in use in England, was the unit of currency often paid to artists and professionals.
The average horse at Tattersalls brought in 121,515 guineas during this year's three-day sale, compared with an average of 127,298 guineas at last year's four-day sale. The sale was boosted by Sheikh Mohammed's purchases, who bought 33 yearlings and spent 6,070,000 guineas in the first two days of the auction alone.
``At the top end, we are reliant on a very small pool of people, in good times and in bad,'' said Goffs CEO Henry Beeby.
`Things Aren't Rosy'
Given the turmoil on the financial markets, the results have been ``beyond expectation,'' Tattersalls marketing director Jimmy George said. ``There is a big wide world out there where things aren't rosy. But all the right people were here, and there were very nice horses. But we are realists. It can't go on forever.''
Goffs' yearling sales held last week posted a 40 percent total decline, to 32.35 million euros ($44.23 million). Buyers spent 72,867 euros on average per horse.
``There couldn't have been a worse week for us to be selling racehorses,'' Beeby said. ``We're dealing in the top end of a luxury item. We'd be naive if we thought we were cocooned from the financial markets.''
Some people who'd been attracted to investing in horses are now having second thoughts, Eatonfield CEO Lloyd said.
``A lot of property people are pulling out,'' said Lloyd, who spent about 300,000 pounds on 10 yearlings this year. ``I have pulled right back. The crisis has had a blanket impact.''
(Source: Bloomberg)
