Reaping returns from vintage guitars (Pt 2)

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    From left:1976 Gibson Les Paul Custom, 1996 Gibson SGT Standard ST, 2000 Gibson ES 335 Vintage Sunburst, 2015 Fender 60th Anniversary Commemorative and 1967 Gibson SG Junior
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    2015 Fender 20th Anniversary Stratocaster Relic, with certificate of authenticity
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    2015 Fender 20th Anniversary Stratocaster Relic, with certificate of authenticity
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This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on June 21 - June 27, 2016.

 

The prices of vintage guitars took a hit during the global financial crisis, but they have been recovering since 2013. What’s in store for Malaysia’s burgeoning vintage guitar market?

 

Electric guitars more popular locally

Unlike the US market, where people collect all types of guitars, Malaysian collectors tend to focus on acoustic and electric guitars. Mohd Fikri says many of them love electric guitars as they are linked to their memories of growing up.

“In the 1980s, Malaysians were exposed to a lot of heavy metal music. It was only in the 1990s that acoustic guitars became popular. Yet, acoustic guitars are much more expensive than electric ones because of the choice of wood, cosmetics, workmanship, styling, touch and feel.”

The Global Electric Guitar Market 2016-2020 report, produced by US-based global research firm Research and Markets, predicts that the global market for electric guitars — vintage and new — could expand at a compound annual growth rate of 3.44% between 2016 and 2020.

Meanwhile, UK-based market research company Technavio forecasts in a 2015 report that the global electric guitar market is anticipated to reach almost US$2 billion in revenue by 2020 while posting a moderate growth rate over the next four years. 

When it comes to buying guitars, the first thing you look at is the brand, type of wood and production size of the particular model, says Tee. “I believe that in Malaysia, the collectible vintage guitar market is dominated by Gibson and Fender, and some PRS, with a focus on specific models such as Gibson Les Paul, Fender Stratocaster, Fender Telecaster PRS McCarty and PRS Ten Top. Limited edition models that come with the signature of an artist definitely have investment value,” he adds.

Ahmad Tajuddin says popular brands such as Fender and Gibson are worth investing in. Collectors can sell these guitars at cost price or more. 

“[From my experience,] people are looking for vintage guitars from the 1970s, especially Fenders, as they are more affordable to middle-income and lower-middle-income earners. The models from the 1950s and 1960s are very expensive. Gibson models from the 1960s and 1980s are in demand, while those from the 1990s are a good buy [as they are the most affordable],” he adds.

Goh says a good way to gauge an investment-worthy Gibson or Fender is to listen to the market. “The market itself shapes the reputation of a guitar as it spreads by word of mouth. Then over time, it is accepted as fact [by traders and collectors].”

According to the five members, the safest models to buy for high resale value are artist signature models — those used by famous musicians such as Jimmy Hendrix and signed by them. 

Mohd Ariff says collectors on a budget could start with vintage electric guitars from Japan, such as Orville Les Paul, Greco Les Paul, Epiphone Les Paul, Tokai Les Paul, Greco Super and Aria Pro, which were released in the 1970s to the 1990s, as they could cost as low as RM800. “In my experience, the worst I have made was a 30% loss because it was an urgent sell. My best return was 150%.”

“For new collectors, it is important to get advice from a friend who is also a collector [to help you navigate the market],” says Goh. From there, you can trade up to a better, more expensive model, says Tee. “You can keep upgrading your collection [and maximising your investment return],” he adds.

Mohd Fikri warns against buying guitars based on their price tag and recalls a lesson learnt. “I kept on buying without understanding their value. Then, I ended up with too many guitars that were not worth much. If I invest in a Gibson, I will have no trouble selling it. But for non-vintage, mass-produced guitars, it is possible for you to lose [as much as] 40% of what you initially paid.”

Vintage guitars are not liquid investments as it takes time to find a buyer, says Tee. “Sometimes, I can sell one within a week. But sometimes, it takes a year.”

 

Risks

The local vintage guitar market is not as mature as the one in the US, so there aren’t any professional appraisers here. “We refer to the world market, from eBay to certain websites such as edroman.com, where they have a selection of rare vintage and limited edition guitars. Also, websites such as reverb.com feature selling prices, so you can see a price chart or graph,” says Mohd Fikri. Prices in Malaysia are benchmarked against those in the US, adds Tee. 

There are plenty of fake vintage guitars in the local market, so it is important that collectors are able to tell a really good fake from an original vintage guitar. “A lot of online retailers are selling so-called ‘custom’ guitars — they could be from Indonesia, China or Sabah. Investors should be wary of these. They are copies of famous vintage guitars, which the retailers [allegedly] assemble themselves using parts from China, which are then sold at a good price. The retailers even copy the serial number of the model. So, if you call the factory, the number is valid,” says Tee. 

“The price of the guitar is another sign that it may not be an original. For example, if a seller is willing to let go of his guitar for RM2,000 when it is worth RM10,000, it raises a lot of questions for traders like me.”

Ahmad Tajuddin and Mohd Fikri say it is important to get professional advice from guitar experts before buying one. “Before I bought my first Gibson, I called Tee. He assured me that it was safe for me to buy. I contacted Gibson as well. While they didn’t say it was an original, they said the serial number was consistent and valid. So I bought the guitar. This is how it normally goes when it comes to buying vintage guitars,” says Ahmad Tajuddin.

As there have been many cases of theft, he suggests that owners wait and keep an eye on their guitars when they send them to a shop for maintenance, such as fretting (restringing the guitar). “There might be some unscrupulous guitar technicians who change the [original] screws and parts and replace them with local ones,” he says. If this happens, the value of the guitar is significantly reduced. 

Vintage guitars, like other passion investments, can be enjoyed by the owner before cashing in on them. “When you invest in a guitar, you can enjoy it and have fun playing with it. But when you invest in a unit trust fund, you can only enjoy the returns,” says Ahmad Tajuddin.

Mohd Fikri says collecting vintage guitars has allowed him to meet other like-minded enthusiasts. “It is a way of meeting people. I have even met royalty. When we have a common interest — in this case, music and guitars — the notion of social status or rank just disappears.” 

Goh agrees. “When a group of collectors come together, it is as if we have known each other for a long time. Essentially, we are strangers who came together because of a common interest.” 

Sometimes, there are regrets when it comes to selling their vintage guitars, either because of sentimental value or the prospect of a better trade. “I frequently buy and sell vintage guitars, some of which I have regretted selling because their value is much higher now,” says Mohd Ariff. 

 

Top guitar brands

The top five guitar brands in Malaysia (both electric and acoustic), according to the unofficial Gibson Fans Malaysia club, are:

  1. Taylor 
  2.  Martin 
  3.  Gibson 
  4.  Fender 
  5.  PRS

 

The top five electric guitar brands in Malaysia, according to the unofficial Gibson Fans Malaysia club, are:

  1. Gibson 
  2. Fender 
  3. PRS 
  4. Ibanez 
  5.  ESP

 

INSURING YOUR INVESTMENT

Yvonne Goh, manager of Mega Music Sdn Bhd, says it is of utmost importance to have your vintage guitar collection insured. 

“Unfortunately, as the collectible market here is not mature, most insurers in Malaysia do not offer insurance for collectibles and hard assets such as vintage guitars. Some independent insurance agencies can underwrite one for you, but they can be expensive,” she adds. 

Raymond Fong, CEO of ORC Risk Consulting Group, an independent insurance agency, says specialised market insurance for collectibles such as guitars costs an annual premium of 3% of the collection value. “This insures the collection against theft, accidental damage and fire.”

Alternatively, you can get a standard fire insurance policy for the home as it insures all the items in your house, or retail fire insurance if you have an office or a shop. “For retail fire insurance, your guitars will be covered under ‘stocks’,” says Goh.Maintaining the value of your guitar

 

To maintain the value of your guitar, the unofficial Gibson Fans Malaysia club has the following advice.

Look at whether the vintage guitar has been disassembled before. Collectors are very particular about original parts. So, do not change, make modifications, upgrade parts as this significantly impacts the value of the guitar.

Restringing or fretting the guitar is not considered modification — it is maintenance and does not impact its value.

If the metal hardware on the guitar oxidizes or rusts, do not polish it as the value will be affected as well.

Use only a microfibre cloth to clean a vintage guitar.

Reaping returns from vintage guitars (Pt 1)