Spotlight on Latest Bordeaux Vineyard Prices: 8 châteaux sales in 2020 worth 72% of total value of transactions

by Alex Hall, Vineyard Intelligence, November 2021

The recurring theme of the French vineyard market over recent years, both at a national and regional level, has been the relentless increase in the price of vineyards in the most prestigious appellations and the increasing divergence between prices in those appellations and the rest of the market.

As with many other asset classes, the pandemic has only served to reinforce this disparity, as wealthy investors seek out prime assets that are viewed as offering a safe haven and the potential for long-term capital appreciation. Nowhere is this phenomenon more apparent than in Bordeaux, where Grand Cru Classé estates in the Médoc and Saint-Emilion continue to change hands for tens of millions of euros, while other properties, often located just a stone’s throw away, struggle to attract buyers.

In their latest annual report looking at activity in the French vineyard market, the SAFER recorded a significant fall in the overall number of transactions in 2020, with a total of 8,190 transactions, down from 9,200 in 2019. This was the lowest level for almost 30 years and less than the figure in 2009 following the financial crisis but perhaps not surprising on the context of the global pandemic.

The metrics for the total area of vines sold and the total value of transactions also fell in 2020, with 14,600 hectares of vines changing hands for a total of €861 million, vs 18,300 hectares for a total of €987 million in 2019.

However, even against this more muted backdrop in terms of market activity, the headline figure for the average price of AOP vineyards in France still managed to register a modest 1.3% gain in 2020, rising to €150,500 per hectare, from €148,500 in 2019.

A closer look at the data shows that this increase is once again due to rising prices in a very small number of appellations and is based on a very small number of high value transactions in those appellations. According to the SAFER, of the total of 8,190 transactions completed in France in 2020, just 10 transactions accounted for 19% of the total value, while in Bordeaux the sales of just 8 estates represented 72% of the total value of transactions in the region.

A quick look at recent transactions in Bordeaux supports these figures. Since the beginning of 2019 four Grand Cru Classé estates in the Médoc – Château Dauzac, Château Cantenac Brown, Château du Terte and Château Lafon Rochet – and four Grand Cru Classé estates in Saint Emilion – Château Le Prieuré, Château Beauséjour Dufau Lagarosse, Château Villemaurine and Château Grand Pontet- have changed hands, together with Château Petit Village in Pomerol. Each of the transactions in the Médoc were in excess of €100 million while the 6.5-hectare Château Beauséjour Dufau Lagarosse was widely reported to have been sold for €75 million.

The SAFER estimates that the total value of Bordeaux vineyards stood at €17.5 billion in 2019. Consistent with the region’s wines, Bordeaux vineyard prices span a huge range, from less than €10,000 per hectare for the cheapest vineyards to several million euros per hectare for the most expensive. While this price differential has always existed, reflecting the diversity of the region and its wines, the gap between the least and most expensive vineyards has increased significantly in recent years. This has been driven in part by softening demand for vineyards producing entry-level and mid-priced wines but primarily by the demand for vineyards in the most prestigious appellations.

This is best illustrated by dividing the appellations into three price categories, based on the 2020 SAFER data: those valued at up to €30,000 per hectare, those between €30,000 and €100,000 per hectare and those worth more than €100,000 per hectare.

The lower category includes the generic AOP Bordeaux and the Côtes de Bordeaux appellations, which together account for 60% of Bordeaux’s total planted vineyard area, and all of the sweet white wine appellations:

The middle category includes all of the Médoc appellations, with the exception of the “communal” appellations of Margaux, Saint-Julien, Pauillac and Saint-Estèphe, together with Graves and the Saint-Emilion satellites:

The upper category includes all of the most prestigious appellations of the Right and Left bank, home to the Grand Cru Classé estates of the 1855, Graves and Saint-Emilion classifications:

By indexing the data in each category to 100 we can see the relative price development since 1991:

This analysis demonstrates the significant divergence in prices over this period, with the average price of vineyards in the higher price category rising almost 500% since 1991, while those in the lower category have declined by 60% on average over the same period.

After a period of relative stability after 2010, prices of AOP Bordeaux and Côtes de Bordeaux vineyards have fallen again in the last few years, decreasing by 10% between 2019 and 2020. Many producers in these appellations operate on very fine margins and are consequently particularly badly affected by price pressures and falls in demand. While prices were temporarily supported by interest from overseas buyers, notably Asia, a recent decline in interest from this sector, coupled with an increasingly challenging market, has led to a significant imbalance of supply and demand and thus weaker prices.

Although the appellations in the intermediate category have fared better, registering modest gains in recent years, a number of these appellations have also seen vineyard prices fall in the last two years as a result of adverse market conditions and the resulting impact on profitability. Average prices in the Médoc and Haut-Médoc, fell by 20% and 13% respectively between 2019 and 2020, although prices in the Graves have recovered some ground recently.

The above figures are in stark contrast to the picture in the third category, which includes just eight appellations: Pomerol, Lalande-de-Pomerol, Saint-Emilion, Pessac-Léognan, Margaux, Saint-Julien, Pauillac and Saint-Estèphe. While these appellations account for less than 15% of Bordeaux’s total vineyard area they are home most of the region’s most famous chateaux and most expensive wines and they continue to attract interest from buyers, even in the face of sharply increasing vineyard values.

In Pauillac the average price per hectare has risen by nearly 1,200% since 1991, from €220,000 to €2,800,000 per hectare in 2020, and prices in Pomerol have increased by almost 430% over the same period, to an average of €2,000,000 per hectare in 2020.

Although the average price in Saint-Emilion has not demonstrated quite such spectacular gains, prices are closely linked to its widely accepted hierarchy of terroir and parcels in the most sought-after locations are currently changing hands for €5 million per hectare or more.

This level of price disparity is not uncommon in some of the most prestigious appellations, where location and the influence of the classifications can have a significant impact on price. While it is still possible to acquire parcels of vines in Pomerol for around €2 million per hectare, the best parcels are now changing hands for between €5-7 million per hectare. The latter figure represents a staggering 1.750% increase on the average price paid in 1991. However, even this figure is dwarfed by the €87 million per hectare price that was reported for the sale of a 20% stake in Château Petrus in 2018.

So who is buying and in what direction is the market heading?

Notably, there has been very little activity involving foreign investors in Bordeaux in the last two years, with the majority of buyers being French and, more often than not, already owning other vineyards in the region.

The significant transactions listed above all involved French buyers:

• Château Dauzac                          Christian Roulleau, founder of SAMSIC facilities management
• Château Cantenac Brown            Le Lous family, owners of Urgo healthcare group
• Château du Terte                        French insurance company / Helfrich family (Grands Chais de France)
• Château Lafon Rochet                 Jacky Lorenzetti  (Château Lilian-Ladouys, Château Pédesclaux, Château d’Issan)
• Château Le Prieuré                     Suravenir insurance company  (Château Calon Ségur)
• Château Beauséjour Duffau Lagarosse   Courtin-Clarins family / Joséphine Duffau Lagarosse
• Château Villemaurine                 Lefévère family  (Château Sansonnet, Château Moulin du Cadet, Château Soutard-Cadet, Château Harmonie)
• Château Grand Pontet                Domaine Clarence Dillon  (Château Haut-Brion, Château La Mission Haut-Brion, Château Quintus)
• Château Petit Village                   Moulin family  (Galeries Lafayette, Château Beauregard)

 

For existing owners, such as Domaine Clarence Dillon, these purchases are coherent with a strategy of acquiring prime assets that complement their existing portfolio of estates (in this case a further addition to the Château Quintus vineyards), while new owners, such as Christian Roulleau and the Le Lous family, are typically looking to invest in a rare, luxury asset, that offers exceptional stability and long-term capital appreciation.

Away from these headline transactions, the picture remains broadly similar, with many transactions involving existing owners, often with neighbouring properties, who are seeking either to increase production capacity, to achieve better economies of scale or, in the case of two prime parcels of vines recently sold in Pomerol, simply to take advantage of a rare opportunity to expand their footprint in the appellation.

There is little reason to expect the trends outlined above to change significantly in the coming months. In the prime appellations existing owners will continue to be on the lookout for exceptional opportunities and will often be willing to pay a premium, while an abundance of capital looking for a home will continue to provide a source of new market entrants. Outside these appellations the number of sellers is likely to increase as growers struggle with challenging market conditions and their children become more reluctant to step into their parents’ shoes, while buyers will remain scarce.

With thanks to Alex of Vineyard Intelligence.