Should I invest in luxury fashion amid inflation? Interest rates are at the highest they’ve been in 22 years, but timeless items like the Chanel flap bag remain steady in the resale market

Aug 27 , 2023

Although Americans are cutting back on spending amid inflation, the luxury market remains resilient. Photo: GC Images

Hermès Birkin bags, Jean-Michel Basquiat artworks and Rolex watches are among the top investment pieces on the luxury market – but will they appreciate in value given today’s economic climate?

Buying timeless pieces is usually a safer option, but there are other things to consider – like assessing your financial foundation first to see what’s right for you

Some people collect luxury goods as investment pieces. Think of a Birkin bag, art by the legendary Jean-Michel Basquiat or a Rolex. Anything considered timeless or high-quality and that appreciates in value can be called an investment piece.

The luxury market tends to be more resilient than other sectors during economic instability because of high demand, among other factors. That said, is this inflationary period actually a good time to invest in luxury goods? We took a closer look.

Buying luxury goods amid inflation

Gucci is part of luxury conglomerate Kering. Photo: Gucci

The US Federal Reserve has raised interest rates 11 times since March 2022 in an attempt to cool inflation. Interest rates are the highest they’ve been in 22 years and, consequently, we’ve seen the cost of borrowing increase and spending on non-essential goods decrease.

While Americans have cut back on spending, the demand for luxury goods is still strong. Research by J.P. Morgan shows a seven per cent year-over-year increase in the luxury goods market in the fourth quarter of 2022, despite significant price hikes.

LVMH recorded record sales and profit highs for 2022. Photo: Bloomberg

Luxury brands raised the prices of their products by almost 17 per cent in 2020 and early 2021 in response to lower sales during Covid-19, according to a 2022 study by KPMG International. This change is significant considering typical price increases are five per cent to 10 per cent. These price increases didn’t only benefit luxury brands; people who invested in these goods in prior years may have also seen gains.

Gloria H. Gill, a retiree who we spoke to on Facebook Messenger, said the value of her large classic Chanel bag has more than doubled in about seven years. Gill bought the bag for US$4,800 in Paris in 2016. It now has a market value of around US$10,000.