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Not All Art Is A Good Buy
With paintings fetching record prices, experts fear the market may be at its peak. The art market is in the grip of its biggest boom since the late 1980s, with paintings fetching record prices last week at sales at Sotheby’s and Christie’s in London. But professionals have warned that the boom could quickly turn to bust if the economy takes a turn for the worse, leaving investors who have piled in at the top of the market with egg on their face.
Although there are still pockets of value, collectors are having to search increasingly hard to find world-class artists at bargain prices. The Art Price Index, which monitors worldwide auction prices, increased by 25 per cent last year and is now just 5 per cent below its peak, reached in 1990. This high looks likely to be breached as the buying frenzy continues.
Investors and collectors splashed out £350m on Impressionist, modern and contemporary art at auctions in London last week. The star exhibit was Francis Bacon’s painting of a pope, Study for Portrait II, which fetched £14m at Christie’s, almost double the auction record for the British painter, who died in 1992. Scots-born Peter Doig was also in the spotlight when his work The White Canoe sold for £5.7m, making him Europe’s most expensive living painter.
Dealers and auction houses have never had it so good. No fewer than 810 works were sold for more than £500,000 last year as wealthy hedge-fund managers, bankers, traders and lawyers with large City bonuses piled into the market. Newly moneyed buyers from Russia, Asia and the Middle East are helping to fuel the boom. Bonham’s opened an office in Hong Kong last month to cash in on growing demand in China, following Sotheby’s and Christie’s lead. When Christie’s held its first sale in Dubai last May it took more than £4m.
Contemporary art, defined as work produced since 1960 and including artists such as Bacon and Andy Warhol, has been getting a lot of the attention. But as prices leap ever higher, one of Britain’s leading art con-sultants warned last week that prices being reached on the contemporary art market could be close to their peak.
Daniel Morris at art consultancy Corfield Morris said: “The market is being fuelled by the vast amount of wealth that is being created around the globe. If that starts to dry up, say because of an economic slow-down or a stock-market slump, the bubble will burst.” The contemporary-art market is more susceptible to the economic cycle than old masters or Impressionists because buyers tend to be younger and have made their wealth recently, rather than relying on old family money. Investors are also at the mercy of art-world fashions. Prices can soar on the back of a trend, only to slump again when fickle collectors move on to something new.
However, Morris believes there are still opportunities to pick up inexpensive works by potential stars of the future, if you know where to look. In the contemporary field, Corfield Morris like American painter Claire Sherman, whose show at the Houldsworth gallery in London has just closed. It also tips artists from the West Coast of America such as Samantha Fields.
There is also a buzz around Chinese contemporary art, although it is getting harder to find bargains. The price of contemporary Chinese art has soared 440 per cent during the past five years, according to Artprice.com, and 25 of the top 100 contemporary artists, ranked by sales revenue, are Chinese. At Christie’s in October, Charles Saatchi paid £770,000 for a work by Zhang Xiaogang, one of the country’s hottest artists.
Investors are also advised to look beyond paintings to find value among photographers such as Canada’s Philip Jessup. Morris also recommends 18th and 19th century English furniture as potentially fertile ground. Although furniture from this era fetches high prices at the major auction houses, you may still be able to pick it up on the cheap at smaller local sales. The rising cost of buying and selling works of art through big auction houses can put off some potential investors.
Sotheby’s and Christie’s used to charge commission of 20 per cent on sales up to £100,000, but last month they hiked it to 20 per cent on the first £250,000. Above that they charge 12 per cent. Vat is payable on all premiums and charges, and buyers may also have to shell out for shipping, packaging and storage costs, depending on the size and fragility of the item. This comes on top of a tax called droit de suite, which entitles living artists to royalties of up to 4 per cent on the resale price of their works. Since the tax was introduced last year, more than £1m has been collected and distributed to artists.
You can avoid the high costs of buying and selling at a traditional auction by going online. Works of art are often listed on eBay as well as specialist sites such as Artprice.com. Art fairs are also a good place for potential investors to start their search for more affordable pieces. The next major art and design fair, called Form, will be held at London’s Olympia early next month.
The Arts Council also runs an “Own Art” scheme that offers interest-free loans of up to £2,000 when you buy contemporary art from designated galleries. Investors who are not confident enough to buy art themselves can invest in the Fine Art Fund, run by Fine Art Management Services, which managesa portfolio of old masters and modern art for investors.
A more bespoke service is provided by private banks such as Butterfield Private Bank and Switzerland’s BSI. They offer art advisory services to help their clients avoid dud pieces and decide when to sell. Fees for these services usually depend on the size and number of deals overseen for a client. They are generally about 2 per cent of the sale price, although they can be as high as 10 per cent.
TIPS FOR 2007
Painters
- Claire Sherman (paintings can be seen at kavigupta.com)
- Samantha Fields and other artists from the American West Coast (see zerodegreesart.com)
- Chinese art — although it is getting expensive
Photography
- Philip Jessup (jessup.ca)
Furniture
- Traditional English furniture (18th and 19th century).
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