Review of 2013 and predictions for 2014

2013 was another busy year in the Bordeaux vineyard property market that saw a continuation of the trends seen in 2012:

  • Chinese investors were once again the largest contingent of buyers, purchasing upwards of 25 properties according to my research (see lists below), in line with the 27 purchases recorded by the SAFER for 2012.
  • Buyers from China and Hong Kong continued to focus on properties in the less well-known appellations but also purchased a number of higher profile estates, notably Chateau Loudenne, Chateau de la Riviere, and three estates belonging to Michel Rolland and his family, including Chateau Le Bon Pasteur in Pomerol.
  • French buyers, particularly established Bordeaux producers, continued to dominate the market for prime Bordeaux vineyard assets, as evidenced by the Cuvelier family’s purchase of three Saint-Emilion Grand Cru Classé estates from the Reiffers family, Jacky Lorenzetti’s purchase of Chateau Béhèré in Pauillac and a 50% stake in Chateau d’Issan, Domaine Clarence Dillon’s purchase of Chateau L’Arosée and the Dassault family’s purchase of Chateau Faurie de Souchard.

Over the last three years, between 35 and 40 Bordeaux vineyard properties have changed hands each year, out of approximately 100 properties on the market at any one time. Since 2008 at least 60 Bordeaux vineyard properties have been sold to approximately 40 different buyers from China and Hong Kong (see list below), with buyers from this region accounting for approximately 60% of sales in the last three years. Several buyers have followed up an initial purchase with subsequent acquisitions, while others have bought multiple properties at the same time, often from the same owner. The most prolific Chinese investor over the last three years is Qu Naijie’s Haichang Group, which is reported to have acquired more than 20 vineyards around Bordeaux.

One interesting development in 2013 was the news (Decanter article June 2013) that some of the properties recently acquired by the Haichang Group were back on the market. I have also heard unconfirmed reports of another Chinese investor deciding to sell an estate he bought in 2012. It is difficult to speculate as to the reasons behind these sales. While for some investors it may well be part of a wider strategy, for others the reality might be that the challenges of owning and running a French vineyard are greater than they had anticipated. If so, they would not be the first foreign buyers to discover this.

2014 is unlikely to see any significant let-up in demand from Chinese buyers, who continue to be attracted by the prestige associated with owning a French chateau and by the potential commercial gains from selling Bordeaux wines to the world’s largest consumer of red wine. However, they are unlikely to displace French investors as the principal buyers of prime Bordeaux vineyard assets for a number of reasons: Firstly, these assets command a much higher price without the same opportunity to improve returns by selling the wine into the Chinese market. Secondly, many of these properties never make it onto the open market, so few buyers outside Bordeaux have access to these deals. Thirdly, these properties have usually been in the same family for generations and when they come to sell they are reluctant to see the property move out of French ownership.

The market for prime vineyard assets in Bordeaux will continue to be restricted by a lack of properties available for sale, particularly in the Left Bank appellations of Margaux, Saint Julien, Pauillac, Saint-Estèphe and Pessac-Leognan, and newcomers to the market, whether international or domestic, will continue to face stiff competition from established local interests. Investors looking to purchase top tier Cru Bourgeois producers in the Médoc and Haut-Médoc appellations or better known Graves estates will also struggle to find opportunities.

There will continue to be a steady supply of properties for sale in the less prestigious appellations, where the commercial viability of many operations remains under threat, notably Bordeaux / Entre-Deux-Mers, the Cotes de Bordeaux (Blaye, Bourg, Castillon, Cadillac, Saint-Foy-Bordeaux), Fronsac and Canon-Fronsac, the Saint-Emilion satellites, Moulis and Listrac and smaller Medoc producers. However, demand for properties in these areas will depend on sustained demand for their wines in China and elsewhere in Asia attracting buyers from those countries and on larger local producers looking to increase production. Properties with attractive housing and interesting historical context will continue to be the most sought after.

Demand from overseas investors is likely to remain strongest in the sub five million Euros sector, with a possible increase in demand for properties priced below two million Euros, as more private individuals, principally from China, look to acquire small vineyard properties in prestigious European wine regions as a lifestyle investment, rather than a purely commercial venture. These smaller properties satisfy their desire to invest in real estate outside China and potentially gain EU residency rights while being easier to manage (although not necessarily more profitable) than larger-scale operations.

Chinese acquisitions of Bordeaux vineyards since 2008 – this lists the Bordeaux estates sold (or reported to have been sold) to Chinese / Hong Kong buyers since 2008. Given the lack of any public records detailing these transactions it will undoubtedly contain one or two errors and omissions but it is, to my knowledge, the most comprehensive list published to date.

Bordeaux vineyard properties sold in 2013 – this lists vineyard properties, i.e. entire estates comprising vines, cellars and housing, sold (or reported to have been sold) in 2013. As with the above list, I hope to have included most transactions but there might be one or two errors and omissions.

Alexander Hall