Art money, smart money
What are people buying?
Over the past three decades, art buying has grown steadily in the volume and magnitude of transactions worldwide, and on past evidence there are few signs that this growth will abate. So what are people buying and, if you are an art lover, are you alone in wondering where might you best invest that venture capital or home décor budget, regardless of how modest, or indeed immodest, that sum may be?
On recent evidence, the tendency to stash one’s cash in the safe haven of Old Masters seems to have shifted - and maybe for good. During the last decade the biggest growth area in terms of sales volume and profitability has, without doubt, been in the area of Modern Art (aka. Post-war and 20th Century contemporary art). Whilst the global art market contracted slightly in 2015 (for the first time in half a decade), there were still declared global sales of artworks from all major sectors in that year amounting to around $64 billion, and whilst this compares unfavourably to the $68 billion generated in 2014, it is still a very hefty sum indeed. So let’s start by following the money, but before doing so, I would like to acknowledge the expertise and insight of Alexander Forbes of Artsy and Robert Read of Hiscox for market insight which has shaped my thinking, and which is cited below.
In 2015-16 many of the major auction houses sought to manage market expectations and issued profit warnings as they anticipated an economic slowing of the BRIC economies. This reality check was justified as 2014-15 saw China’s art market contract by almost 25%. In contrast, over the same period, the US saw a 4% increase in market share to account for 43% of the world’s art sales (some $27.6 billion), a figure almost double that of the second largest market, the UK, with its sales of around $14 billion. We should also note that, despite the decline in the overall value of 2015 sales, the number of individual sales transactions actually increased, or at least declined proportionately less, by around +2% compared to the -7% fall in absolute fiscal terms.
Behind these headline figures for the top three, the market also saw the number of sales of artworks priced above a million dollars increasing at a faster rate than other price brackets. Statistically, the top, (necessarily) super-rich 1% and 0.1% of art investors had the greatest impact on the market, with almost 60% of all revenues generated from individual works retailing with a $1 million+ ticket. If you thought this was extreme, then almost 30% of total value of artworks sold worldwide during 2015-16 (some $21 billion) were ‘big ticket’ items with individual price tags of $10 million or more. Highlights (or low points, depending on how you see it) in the period 2014-16 were the sale at auction of Picasso’s ‘Les Femmes d’Alger’, from 1955, which sold for $179 million at Christie’s New York and Modigliani’s ‘Nu Couche’, which fetched a modest $170 million by comparison .
But before we get carried away, the art market, like all markets can and does go down as well as up, so ‘Buyer (and seller) Beware’, should never be far from one’s mind. Whilst the astute purchaser of Richard Smith’s ‘Another Place’ (1959), paid a modest $2,700 in 2006, selling a decade later for $44,000, such yields (+1,500 %) are relatively few and far between. Weigh this against more sobering tales such as Tsagolov’s ‘From the series of office affairs’ (2008-9), acquired at its market zenith for $54,000 in 2009, only to sell at the, ahem, affordable bid price of $1,700 in 2016. Such losses, whilst salutary, pale into insignificance when calibrated against the investor who saw a $60 million depreciation in investment over 8 years with a single work at the 2016 auction of Paul Gaugin’s ‘Te Fare (La Maison)’ (1892), realising $25 million on the item previously bought (also at auction) for $85 million in 2008.
The elephant in the sale room is now the online market, and just in case you are thinking that this comprises a few tatty posters on eBay or shabby-chic old masters from Sotheby’s.com, then think again. Online art sales are running at almost $5+ billion p.a. (some 7%) of the global market, and this is growing fast. Online sales analysis conducted by Invaluable shows that in 2015-16, roughly a quarter of all art purchases by volume were made online, with an increasing number of these being above the $10k tag and around 40% of purchasers being first or second-time buyers, aged between 18-34. According to Hiscox Online Art Trade Report , if current trends continue, the online art market may well approach or exceed $10 billion by 2020, perhaps accounting for 40% of market turnover. To substantiate this figure, Hiscox also found that 40% of visitor traffic to art websites, galleries, museums, dealers and auction houses, originated from mobile browsers, in lay terms from smartphones or tablets, with around one third of online art deals being transacted to completion from mobile devices. Anecdotal evidence also suggests that seasoned buyers and apprehensive new entrants to the market may prefer the relative anonymity of online buying, to the stress of showing their hand at a live auction or cognoscenti face-to-face sales environment.
While social media sales of artworks are only in their infancy, and Instagram-based $24 million sales of works such as Basquiat’s painting of the boxer Sugar Ray Leonard in November 2016 are rare, I would argue that instances such as this are bound to increase. Artsy, MutualArt, Saatchiart.com and the rest, are gearing up as they cultivate the new market driven by the affluence and unprecedented digital literacy of 18-34 year-olds. In my view, online outlets with recognized artists and authenticated stock are the ones to watch as well as being the ones that serious buyers and collectors will price-compare.
In summary, an investment in works by ‘name’ artists from 1945- 2010 seems like a reasonable punt, or a punt that I would, (and occasionally do) make. But there are a few things to remember: Never set your heart on a piece of work to the extent that you go way beyond estimate or valuation; research the artist and seek out professional advice; find out if the artist is early, mid or late career or recently deceased (this sounds cynical I know); buy from a reputable dealer and get a certificate of authenticity; once you have it, insure it, look after it; if the deal seems too good to be true, then it probably is.
Finally, buy something you love and you’ll never be disappointed.