Diamonds aren't an investors best friend
Diamonds may be forever but in many cases the resale value of a piece of jewellery is likely to plummet by 50 per cent or more the minute the customer walks out of the jeweller's door.
Which is why savvy jewellery buyers are increasingly purchasing at auction, where prices can often sell for a third of what an equivalent piece would cost if bought new from in a traditional jewellery store.
Several auctions houses around the country hold regular jewellery auctions and with their catalogues being available online and most auctioneers accepting phone bids, buyers no longer need to be in the auction room to secure the piece they want.
And with prices at auction ranging from $100 to $50,000, there's usually something for every budget.
Some of the biggest bargains to be had are engagement rings.
A couple may have paid $5000 for a new engagement ring in a jewellers, and then the engagement is called off and they take the ring to an auction house to sell, only to learn they may get about $1000 for it.
A typical example was a solitaire diamond ring auctioned by Dunbar Sloane last year. The band was 18 carat gold set with a 0.52 carat diamond and it had an insurance valuation of $4995.
It sold for $1170.
One of the reasons engagement rings can sell so cheaply is that people often don't like the idea of buying someone else's ring.
"For a young couple, going to a jeweller's shop and choosing the engagement ring is all part of the experience. The big problem is when the engagement is broken," Dunbar Sloane's jewellery expert Bettina Frith said.
However, the bargains at auction are not limited to engagement rings.
"I tell everyone, don't buy new," said Fenella Tonkin, the jewellery expert at Cordy's auctions.
Even those with money to spend on spectacular pieces can find bargains at auctions.
One of the pieces sold at a Cordy's auction last year was a ring with a 2.33 carat diamond, with smaller pave set diamonds an the shoulders of the ring. It had an insurance valuation of nearly $60,000 and sold at auction for $18,000.
Tonkin said some people were superstitious about buying estate jewellery that had belonged to someone else, but she believed such misgivings were misplaced.
"They are pieces that have been loved and cherished by their owners and now they are ready to be loved and cherished by new owners," she said.
Many of the items Cordy's sells are antique or vintage pieces which can have higher standards of workmanship than modern pieces, and classic designs from periods such as the art deco era could have timeless qualities that mean they never really go out of fashion, Tonkin said.
Cordy's also holds weekly auctions where it sells what are known as "bag lots" of costume jewellery.
That's because there are usually several pieces in a bag which are sold as a single lot, but they are not necessarily junk.
Often they are high quality costume jewellery from fashion houses such as Chanel, Dior or Louis Vuitton and they sell for a fraction of their original retail price, Tonkin said.
Frith said many of the skills used to make antique pieces were being lost today, especially in areas such as inlay and enamel work. So such pieces were often only available at auction or from estate jewellery dealers.
As well as its fine jewellery sales, where the most expensive pieces are sold, Dunbar Sloane also holds three or four colonial and collectible jewellery auctions a year.
The pieces sold at these auctions are often Victorian, Edwardian or art deco-era costume jewellery where the stones were paste (man made) rather than genuine.
But they could also be stylish and well made and often sold for under $100.
"So you don't have to have a fantastic amount of money to have a nice collection of jewellery," Frith said.
There are a few things buyers need to know about bidding for items at auction.
Most auction houses charge a buyer's premium on top of the hammer price.
This is a way of sharing the auctioneer's fee between the buyer and seller of a piece.
Auctioneers will deduct part of their fee from the selling price before passing on the proceeds to the vendor.
But a portion of their fee is also added to the selling price and so is paid by the buyer.
For jewellery, the buyers's premium is usually around 15 per cent.
There is usually no GST payable on estate (second hand) jewellery, but GST is charged on the buyer's premium, which pushes it up from 15 per cent to 17.25 per cent of the hammer price.
So if an items sells for $1000 under the hammer, the buyer's premium will add another $172.50 to the total purchase price the buyer must pay, taking the total cost to $1172.50.
So buyers should factor that into their calculations when deciding how much they are prepared to bid on a particular piece.
The estimated selling prices which auctioneers often include in their catalogues usually exclude the buyer's premium.
Some auction houses accept credit payments and some do not. If they do they will often add the credit card fees that apply, because they are selling goods "on behalf" of third parties. So you should check out the terms and conditions of sale which are usually printed at the front or back of an auction catalogue, before bidding.
If there is something you are not sure about you should check with the auctioneer beforehand because if you are the successful bidder for an item, you will usually be obliged to complete your purchase.