Demand not so hot for rare NZ stamp

New Zealand’s rarest and most valuable stamp, a four-pence stamp with an upside-down picture of Lake Taupō, recently sold at auction to an overseas buyer for $225,000 (plus a buyers premium of $38,250). NZ Post had previously owned the stamp, having bought it for $125,000 in May 1998.

NZ Post’s return of 80% sounds pretty good until you realise that it equates to an annual return of just 2.2%pa. Our Chart of the Month compares this increase in value to several other possible investments over the last 27 years. The stamp is the only one of these investments that has failed to keep pace with inflation, with $125,000 in 1998 equivalent to almost $242,000 now. Even putting your money in the bank on a six-month term deposit, paying the highest marginal tax rate, and reinvesting the interest would mean you’d have almost $276,000 now, while $125,000 of gold in 1998 would be worth nearly $1.47m now.

Before you’re tempted to rush out and put all your money into precious metals, take a look at Chart 2. Although gold and silver were by far the best performers since 1998, they were overpriced in 1980 (you would have massively lost money by investing in silver then) and were also relatively expensive in 1904. US shares, as measured by the Dow Jones index, have been a more consistent performer, which points to the importance of investment diversification. Even for shares, an investor in 1931 at the height of the Great Depression would have needed an extreme amount of patience, given that the US stock market remained below that 1931 level until late 1936, and it didn’t surpass its 1929 peak until 1954!

Last month’s auction for the Lake Taupō stamp had a single bidder, with the sale price, at the reserve, at the bottom end of pre-auction expectations. It’s difficult to read much into the limited buyer interest, although weak economic conditions both domestically and globally probably won’t have helped the sale. Perhaps NZ Post would have been better trying to sell the stamp in 2021!

The other difficult aspect to quantify is the shrinking usage of post and its effect on the value of stamps as collectors’ items. The Lake Taupō stamp is one of a kind, and so it should retain its appeal among collectors. However, the waning popularity of stamp collecting, as physical post becomes a thing of the past, makes it hard to be sure about what the stamp’s value might be in another 30 years’ time.