Wine investing is a long-term project, experts say.

Crude oil hasn’t been the only liquid dropping in value recently—the prices of top-end Bordeaux wines peaked in mid-2011 and have trended downward since then.

The Liv-ex Fine Wine 100 index, a price benchmark comprised primarily of the best Bordeaux, rose dramatically from late 2009 to a high point of roughly 360 in May 2011. As of year-end 2014 the index had slipped back to about 240, a level that represented a five-year gain of less than 1 percent.

Does this mean it’s time to buy Bordeaux on the hope the market has reached a bottom? It could be, says Justin Gibbs, Liv-ex director and co-founder in London.

A brief review of the Bordeaux market’s history explains his thinking.

The China Effect

Over the past five years or so, Bordeaux wines went full-cycle from being a top-performing asset class to an underperformer. The driving force behind the price swings was the behavior of buyers in Hong Kong and mainland China and the spillover effects from those buyers’ transactions, Gibbs explains.

In 2008 Hong Kong became the “first fully tax-free environment for fine wine anywhere on earth—no sales tax, no duty, no nothing,” he says.

This arrangement allowed customers in Hong Kong to acquire wines at European prices plus transport costs. The timing was fortuitous because the 2009 and 2010 Bordeaux vintages were both very highly rated, which served to further spur Chinese demand.

Many of those buyers eventually realized they had been paying high or record prices for the top Bordeaux wines, however, and began canceling orders in 2011.

The Chinese government’s decision to crack down on corruption curtailed the practice of gifting high-end wines, reducing demand considerably and precipitating lower prices.

“One of the great gifts to be given (in China) in the early days of 2011 was a bottle of Lafite Rothschild,” Gibbs says. “Effectively the central government in China took away probably half the demand of the Chinese market, if you think that the government center accounts for about half of the Chinese economy.”

Opportunity?

The current Bordeaux market appears to have found some equilibrium, Gibbs notes.

The Liv-ex 100 index started moving higher in the summer of 2014 after 16 consecutive months of declines. The selling pressure appears to have abated and prices have dropped to levels where they can attract a wider range of buyers, as well. He cites the cost of Chateau Lafite-Rothschild, probably the most recognized Bordeaux.

During the wine bull market, the average cost for a case increased from about 3,000 British pounds (GBP) to 12,000 to 14,000 GBP. The price has since settled back to the 4,000 to 5,000 GBP range.

That price is still out of reach for many buyers, but nonetheless it’s more accessible to a larger audience.

“Now, it might still sound like a lot of money for one of the best wines in the world to be spending 500 quid a bottle (500 pounds), but there are enough wealthy people in the world who might just do that,” he says. “There were far less at 1,000 pounds a bottle, less still at 1,500, if you see what I mean. It’s all about where people perceive value to exist and value would be determined by whether or not they were prepared to pull the cork on a bottle of wine at that level.”

Buyer psychology is another factor underpinning the market because a wine’s price can influence its owner’s behavior. As prices rise, wines purchased for drinking start becoming collectible investments. At some price that generates a sufficient profit, however, investors become sellers and offer their holdings back to the market.

The converse is true, as well, says Gibbs. As a wine’s market value falls, it turns from a financial investment back into a pleasure purchase, which curtails the supply coming to market.

“I think that what’s happening is we’re getting back to a point where the traditional buyer—who had withdrawn from the market, because China had taken prices away from them and in fact, they were selling into that market and selling to this new money flowing out of China. They’re now looking at this and saying, ‘Well, actually, I’m beginning to understand these prices again, so I might tip my toe back in, and I’m certainly no longer a seller,’ ” he says. “So the selling pressure is reduced, and perhaps even there are people beginning to look again and think ‘I might buy this market.’ ”