How Are Rare Stamps Valued?

The first point to make about any sort of valuation process including estimating the worth of a rare stamp, is that it takes many years to become an expert.

In understanding how rare stamps are valued, it is worth looking at how experts in the field of stamp collecting do their research so that they establish provenance and arrive at a figure they believe a stamp will achieve if it was being sold at auction.

Fundamentals of valuing stamps

One of the main points to consider is that value is almost always dependent to a large extent on condition and many fraudsters known this, which is why it normally takes an expert eye to spot a stamp which has been intentionally altered from a stamp that is the real deal.

In general terms, a stamp in mint condition which also has the original gum on the back, is often worth more than a used stamp.

Stamps with certain handling faults like creases and tears are often worth less than those that are in perfect condition and the condition of a stamp counts for plenty when valuing a stamp. The exception to that rule is when there is a stamp that is so rare that there are only a handful in existence, meaning that collectors will overlook handling faults in favor of the rarity aspect of the stamp.

Almost without exception, any used U.S postage stamps that have been printed in the last 75 years or so are going to be worth less than their face value and are available in too large a quantity to have any appeal to a collector.

Why are rare stamps so valuable?

With prospect of virtually the last 100 years producing no stamps of any rarity or value, it probably goes some way to explaining that stamps that are considered rare which often date back to the early days of postal services, are going to rise as time goes by and collectors fight over what is available.

Explaining the story of the world’s rarest stamp gives an insight into the mindset of philatelists and demonstrates how prices for some rare stamps seem to be able to scale new heights each time they are offered for sale.

The British Guiana One-Cent Magenta stamp is the only surviving example of a penny issue that was printed in 1856 and on each of the three previous occasions that the stamp has come up for sale, it has set a new record.

The stamp didn’t actually reach anywhere near the estimated $20 million when it went under the hammer and sold for a still impressive $9.5 million, especially when you consider the original postage value.

One of the broader reasons why rare stamps can be so valuable is the fact that the number of wealthy people on the planet has rocketed in recent years, which means plenty of competition and a potential bidding war to push prices up every time a rare stamp comes to auction.

History boosts the price

The value of rare stamps is also heavily influenced by history as well its scarcity value.

Wealthy private collectors are often keen to acquire a rare stamp which has a fascinating history attached to it in addition to the fact that there are not many of them around. This means that you can regularly witness a museum or public heritage body coming up against a deep-pocketed private collector.

China has managed to create a number of billionaires and millionaires in recent times and some of these individuals are keen to flex their financial muscles and acquire something like a rare stamp at almost any price.

Continuing to rise

Rare stamps are valued using the tried and tested method of verifying their originality, confirming the provenance and deciding the level of interest that will be generated based on the story attached to each stamp.

The greater the legend or story attached to a particular stamp, the more likely it is that someone will want to add it to their collection, and will pay a premium to do this.

The fact that there are about currently 1,900 dollar billionaires in the world and that the wealthy Chinese investors in particular, are keen to hold a reasonable percentage of their wealth in alternative assets like rare stamps, seems to be adding an onwardly upward curve to values.

The fact that stamp collecting has seemingly fallen out of fashion in the west in terms of the number of collectors, has largely gone unnoticed due to the fact that there are plenty of willing Chinese collectors who have taken their place.

One estimate suggests that the value of rare stamps has risen by about 11% annually for four successive decades whereas the market for good but not rare stamps has fallen away in comparison.

The scarcity aspect associated with these rare stamps is definitely a factor that attracts certain wealthy collectors and is very much part of the valuation process.

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Elizabeth Goldman is the editor of AlternativeInvestmentCoach.com. She has written for Investing.com, Bullbearings.com and many others.