In a bid to boost demand, the Chancellor of the British Government has temporarily lowered the VAT rate from 17.5% to 15%. This of course only applies to duty paid wine. Whilst the drop in the VAT rate might help to increase demand for other goods, it won’t do any good for wine, champagne and port, as the excise duty rates are simultaniously increased as per below:

I suspect that these increased rates are here to stay, even after the VAT rate will go up to 17.5% again in a maximum of 2 years time.

Please note that both the new VAT and duty rates come into effect on December 1st.

On their news website, the BBC have placed this article. We have been commenting on the recent price fall several times in this blog, so it comes as a bit of non-news. In the article though, Berry's uses the example of Lafite Rothschild 2005 falling in price from the high of gbp 10,000 to gbp 7,500. Interestingly, you can pick up this wine from Ditton Wine Traders for gbp 6,500 – proving our point that our prices are very difficult to beat.

Acker Merrall & Condit have just completed their second auction in Hong Kong. Prices achieved were very conservative, often below the low estimate. However, the sell through rate was encouraging, with 90% of the lots sold. If you are in the lucky position of being cash rich, there are some good pickings at the moment: "When the market gets tough, the tough get going".

Finally, the yearly Hospices de Beaune charity auction has been held this weekend. There as well, prices were on the conservative side. Due to the small crop this year as well as the economic climate, the total sales value was down on the last 2 years. Sterling being as low as it is at the moment, demand from the UK – traditionally one of the biggest buyers, was low. Given these factors, the result was actually quite encouraging says Christie's Anthony Hanson MW in Decanter.

There are more and more signs that the recent, steep fall in prices is starting to halt. Whilst volume of trade in especially October was low, we see that more and more buyers are bargain hunting at the new prices levels. Where 2 weeks ago stock was being offered cheaply without finding a buyer, we now see more and more of the same stock being snapped up and even slightly increasing in price again. There's an interesting article on this in Decanter, with views from various people in the trade.

To add some more background to yesterday's blog entry, Decanter have asked Liv-ex to comment on price developments. Here's what they say: "Fine wine prices hit new low". Interestingly, Liv-ex see that prices have more or less stabilized in the last 2 weeks, after the very steep drop in October. Personally, I think we have not seen the bottom quite yet although we can't be too far off. The latest auction by Hart, Davis Hart in Chicago, on November 1st, shows encouraging sell through rates, with only 8 lots out of 1,128 remaining unsold. Prices fetched were at the low end of the estimates, which themselves had already been lowered. Apparently there are enough buyers at this new price level. Please see Reuters for more details.

In the last few weeks, we have seen Fine Wine Prices coming down rather rapidly. Reuters have just published an interesting article on this, "Global credit crisis puts damper on wine prices". Auction houses see their sell-through rates dropping and prices as compared to only 6 weeks ago are significantly down. When looking at the Livex 100, the widely quoted Fine Wine Price Index, we see a drop of 16% from the high in August.

The nervousness and uncertainty over the future direction of the financial markets and indeed the economy as a whole has lead buyers keeping their money in their pockets, not seeing a reason to buy now when they expect prices to come down further. As there are enough sellers that share this point of view, prices are indeed falling. I expect this to continue until customers and traders feel that either prices have adjusted enough to reflect the market conditions or the current level of uncertainty diminishes and a sense of the bottom having been reached starts to take over.

There is an incredible amount of cash available, waiting for an opportunity to step in. When that happens, prices will go up once more. Possibly not at the same pace as they are now coming down, but there are some very, very good buys out there at the moment and they will be snapped up quickly. Hart Davis & Hart, the US auction house, words this view nicely as noted in the Reuter's article:  "We saw a lot of old faces in the audience on Saturday night that we haven't seen in a couple of years. There were a lot of us who have been through cycles before and they realize it's an opportunity,".

Over the last 50 years, investing in Fine Wine has averaged a return on investment of 10% a year, easily outperforming the main indices. As always, these percentages can be handsomely increased when you call the bottom of the market correctly. But then, that's a dangerous and difficult game to play...

One thing hasn't changed though. Ditton Wine Traders still offer the most competitive prices on top end Bordeaux and Champagne.