by Adriano Dulgher22 March '19
Investing in art. Tips from art investment consultant
Which paintings stand the most chance of rising in value over time
Let’s underline what makes art sought-after by investors. The keyword here is an investment. Many are drawn to the market because of the returns. However, someone has to work hard to identify which paintings stand the most chance of rising in value over time.
Let me show why art investment can be a lucrative endeavor.
In 1941 Picasso himself sold one of his paintings 'Le Reve' for $7,000. Equals to $37,000 in present-day money. In 2013 it was sold for the price of $155 mln. Despite huge profit, the period of 72 years balances the annualised rate on investment at 14.91%. Considering a historical inflation average of 2.17% for the dollar, the net equals 12.74%.
Masterworks art investment is excellent, but the truth is that sales like these are not flukes. A lot of planning goes into achieving such returns. Valuable things the most successful investors will bring to the table include a wealth of knowledge on the artist, artwork and dealer or art consultant. Understanding of the historical significance of the artwork and artistic movement it belongs to is imperative. Close relationships with dealers and taste-makers is a must.
Engaging with online resources such as Artnet and Artprice won’t get you far. Reading books about the market and the history of art as a whole is too late. Live auctions on websites such as Christie’s and Sotheby’s will not reward you with more knowledge but will add to time-wasting. There is only so much you can do online.
To improve your chances to connect to investment-grade art, it helps if you build connections and form relationships with people on the front lines. That means going to galleries, museums, and exhibitions to meet with curators, art collectors, professional art investment consultants and even artists themselves. Oops, it sounds like you need another 30 years added to your life.
When starting, it is not uncommon for people to invest in a piece of art based on little more than a gut feeling. Not every piece of art accrues in value, though, and it is quite an illiquid medium.
Someone said art is known for retaining its value in times of economic uncertainty. Like any other asset class, it is wise to hedge your bets when initially building a fine art portfolio. Many first-time art investors may not be able to cross no matter how hard they try; the buy and sell issue of capital.
The art market can be top-heavy, with a lot of money circulating blue-chip art names such as Picasso. Still, be aware of Andy Warhol or Hirst and platforms were investors could potentially own shares in famous artworks. Unless it goes through securities and exchange commission, you may be left out with the word 'famous' only.
For many investors, the market has grown too big to ignore. Last year global sales reached $63.7 billion, according to an Art Basel and UBS report. Art has delivered average annual returns of 8.9 % since 2000. Cut the inflation rate, so you get the feeling of reality.
Of course, problems may arise, the market is unregulated and sometimes extremely illiquid. Gallery owners and auction houses charge commissions of 25 per cent or more, sometimes negotiable, and art buyers must avoid the pitfalls of forgeries, fakes and rapidly changing tastes.
Today’s art market is a far cry from 20 years ago. The Internet and a proliferation of art fairs have made more art accessible to more people than ever before. The time available to make a decision has shortened dramatically. When you go to an art fair, you have one hour to decide whether or not to spend that one million.
While some art collectors have made fortunes, Goldsmith says the world is littered with warehouses of art that have depreciated as much as 90 per cent. Why?
"While buying a $20 million Picasso may not be the best way to start building a collection, you shouldn’t go too low." You can buy stuff for $10,000, but most likely it is 'Zombies on the Walls' and not going to appreciate much. $80,000-$100,000 in a specialised art gallery is a good starting place. The future of art has to be something that will give us a bit of slow. An artist who makes a difference is worth searching.