A stamp described as the world’s rarest—the British Guiana One-Cent Black on Magenta—sold for $9.5 million recently. That price eclipsed the previous record of $2.2 million set in 1996 for a different stamp, though it fell below Sotheby’s pre-auction estimate of $10 million to $20 million.
Whenever a collectible sets a new price record, it’s natural to ask if that asset class has moved into bubble territory. And while that’s possible, experts say, several factors argue against such a conclusion for today’s stamp market.
First, the British Guiana One-Cent Black on Magenta is unique. Its appearance on the market was compared to seeing da Vinci’s “Mona Lisa” be put up for sale. Thus, its latest sale price isn’t fully indicative of the broader stamp market’s performance.
Second, the broad market price indexes for collectible stamps don’t look bubbly.
The Linn’s U.S. Stamp Market Index, based primarily on fine and very fine stamps tracked by Linn’s Stamp News, was down 1% from April 2013 to April 2014.
According to Linn’s, prices for 19th-Century U.S. stamps specifically fell 2.3% over the past year or so.
Meanwhile, prices on Twentieth-Century stamps decreased 0.2% over those 12 months ended April 30, though airmail prices were up 3.2% for the period.
From an international perspective, the GB250 Index, which tracks the top 250 Great Britain stamps over the last 10 years, increased 3.4% from 2012 to 2013.
Finally, the overall market for investment-grade stamps has been steady, according to some experts.
London-based coin and stamp dealers Stanley Gibbons, which provides data for the GB250 index, says this index has never had a negative year and had a compound annual growth rate of 11.9% over the last 12 years.
The GB30 Rarities Index, which tracks prices of 30 of the most rate and highest-valued U.K. stamps, has had a compound annual growth rate of roughly 10% for the past 40 years.
Keith Heddle, global head of investment with Stanley Gibbons, sees several forces supporting demand for rare stamps, at least for the foreseeable future.
The first—no surprise here—is demand from wealthy Chinese collectors and investors. Speaking simplistically, he says, many of them have accumulated sufficient “bling” assets and are seeking something “a bit more considered and less flashy.”
One reason for this cohort’s interest in stamps was Chairman Mao’s ban on stamp collecting as bourgeois and the resulting pent-up demand. “Since the late-‘70s, early- ‘80s, the Chinese have come back to stamp collecting with a vengeance,” he says.
The price performance of stamps varies at different times among the different national markets, which can create pockets of opportunity for investors willing to shop globally.
In India, Heddle says the market is booming. However, since the country has closed its borders to stamps going in or out, access to investment-grade stamps is very limited.
The European market is flat, he says, as are segments of the U.S. market. The market in Great Britain has slowed to single-digit growth.
When it comes to rising prices, rarity is the driving force, and consequently the market for rare Chinese stamps is very strong.
“The modern market in China has started to flatten out a bit whereas the rarity market is showing growth of about 20% still year on year,” Heddle adds.
Asked whether stamp prices have moved to levels that diminish their potential returns, the expert remains optimistic for at least the next two to three decades.
As Baby Boomers age and withdraw from the investor-collector market that could reduce the number of rare stamp investors, he says, though the basics of supply and demand should still support higher prices.
The nature of stamp investing also favors steady growth, he maintains.
“Stamps are not a hugely aspirational trophy asset the way that fine wine is or art is… it’s not a bling asset. So you don’t get people piling into this market; you get a steady growth of investors and also collectors,” Heddle explains.
Plus, “You’ve got a finite asset, which means you get supply-demand pressures and a gradual increase in price. We have seen that consistently in the top investment grade stamps for decades.”