Art As An investment
The art market shows considerable strength compared to many other assets.
By the last quarter of 2019 the art market had risen up the ranks of the Knight Frank Luxury Investment Index ahead of other alternative investment assets like fine wine and classic cars. Annual growth from Q4 2018 to Q4 2019 was a solid 5%. In the ten years previously, growth was 141%. Fine wine grew by 1% (120% over ten years); while classic cars fell by 7% (194% over ten years).
Above Image: Piece by Sophie O’Leary.
Up & Coming British Artist to ‘watch’.
A FLOURISHING MARKETPLACE
Despite turbulence on the stock market and global equities, the art market has flourished. The 2019 top 100 auction sales, for example, were valued at $2.4bn in 2019, according to Artprice.
The health of this market is reinforced by Artprice research demonstrating by a 17% growth in volume of transactions. The future’s looking bright indeed for the art market as a whole with total global sales reaching a high of $63.7 billion during 2019.
Sophie O’Leary – Emerging and collectable
LED BY THE UNITED STATES, CHINA AND THE UK
The United States remains the market leader with a total fine art auction turnover of $3.3 billion recorded in the first half of 2018, representing a remarkable increase of 48% on the previous 6 months. China lies in close second place with $2 billion and the U.K. comes in third at $1.9 billion. Despite the uncertainties created by Brexit in 2016 the U.K. art market is looking remarkably healthy and London is still the leading global marketplace for works by Gerhard Richter and Pablo Picasso
MODERN & CONTEMPORARY ART
Another critical consideration for investors is the breakdown of the art market by creation period. According to Artprice, modern art accounted for 47% of total auction turnover in 2019 with post-war art representing 21%, contemporary art 12%, Old Masters at 10%, and 19th century art also at 10%. The contemporary art segment is of particular interest since the category has hugely diversified in recent years. In 2019 20,335 artists born after 1945 achieved at least one auction result, a fivefold increase since 2000 which demonstrates the ample opportunities for investors to enter this dynamic market.
The most visible sales in the art world tend to be those at the upper end of the scale like the sale of Edward Hopper’s iconic Chop Suey in November 2018 for $91,875,000. These iconic sales might capture the imagination and the headlines, but beneath these lofty auction results there is ample opportunity to enjoy profitable disposals with a far more
modest initial outlay.
Chop Suey – showing at Christies
UK artist Judi Thomas is becoming more and more collectable with her work being compared to Aubrey Beardsley. Judi’s work can still be picked up for as little as $1000. See more.
HOW THE ART MARKET WORKS
THE PRIMARY ART MARKET
The primary market is the first time a piece of art is sold. This can be direct from the artist themselves, from a dealer, and also work that has been commissioned. The primary market is of particular importance because this initial pricing acts as a guide for the future value of the piece. It is at this moment that art experts begin to predict whether this piece or artist has a bright future ahead and whether they will go on to become well-established artists commanding ever higher prices for their work.
THE SECONDARY MARKET
Any sale which comes after the first direct sale is referred to as the secondary market. Typical sources for these sales include galleries, auction houses, and private sales. The secondary market is critical as it is here that pieces can soar in value. Over the past decade these drastic increases in value have become more and more relevant for contemporary art. According to Artprice, today the average price for auctioned contemporary work sits at $28,000 per piece, a remarkable rise from the $8,000 average in 2000. Over the same period of time contemporary art’s total auction turnover has leapt from $103 million to $1.9 billion, an increase of 1,744%.
The secondary art market is therefore the place where investors and collectors look to make a profitable disposal when they are ready to sell their chosen pieces.
KEY ART MARKET DRIVERS
Whether you’re entering the art market for the first time or you’re a seasoned collector, it is crucial to have a good grasp of which factors can affect the value of an artwork:
For emerging artists gallery representation can be a key indicator of the development of an artist’s career and will most likely impact positively on the value of their work. A long-term relationship with a respected gallery is a definitive indication of an artist’s potential, as are any solo exhibitions which can strongly help to drive value.
Supply and demand applies as much in the art market as in any other market, but art has some unique features which investors should understand. Positive indicators that an emerging artist is in high demand include interest from several galleries, a commissions waiting list, and a high proportion of work sold at solo exhibitions and group shows.
An excellent example of this is the Connor Brothers who, much to their own surprise, sold everything at their first ever show in 2013 and have gone on to enjoy numerous sell-out shows in London, Los Angeles and Sydney.
Record sale prices are important for established and blue-chip artists who already have a strong presence on the secondary market and help to generate significant press coverage and visibility. For emerging artists without track records, auction sales are more a way to test the waters and get an idea of the artist’s potential. Auction results can give an indication of an emerging artist’s current reputation in the wider art world, but it is hard to predict the future growth in value of their work from these early auction results.
Media coverage is a critical driver of the art market. Today this might include anything from TV arts programmes and dedicated art magazines to blogs, social media, and respected mainstream newspapers and publications. The influence of press coverage has been key to the career development of numerous popular contemporary artists like Tracey Emin and Banksy. Investors who purchased work during the early years of these artists’ careers have benefitted hugely from this sustained press interest which has helped their work to appreciate in value. We highly recommend that our clients consider purchasing work from emerging artists who are currently enjoying good press coverage.
Illuminati neon – Saatchi gallery
WHO TO COLLECT
Emerging artists are at the beginning of their careers and have not yet made a name for themselves in the art world. The work of emerging artists is usually sold directly on the primary market from the artist themselves or via a dealer.
This is one of the most exciting categories to invest in as it offers the opportunity to get in early before the artist has become established and can produce very large returns on your initial investment. Emerging artists which are deemed worthy of investment are usually those who are generating interest in the art world and have won prizes, attracted some press coverage, and their work is now being collected.
One thing to consider with emerging artists is that you may need to wait a while for their works to grow in value as they become more and more established, but this is balanced out by the high potential rewards of collecting hot emerging artists.
An Emerging Artist – Case Study: Mark Sloper
Mark Sloper is the genius behind Illuminati Neon which draws on the artist’s punk roots as a friend of the Sex Pistols and producer of the recent Sky TV documentary, Punk 67. Sloper went to art college in Sheffield before falling in love with punk. Each piece is bespoke and hand-blownIn the Illuminati Neon studio in Shepherds Bush, featuring Sloper’s characteristic witty punk messages which bring a touch of irony or humour to the image.
Illuminati Neon is rapidly developing a dedicated following on the international art circuit, and in September Mark Sloper’s work featured in the world’s best emerging artists exhibition at the prestigious Saatchi Gallery in London.
For the moment Illuminati Neon’s pieces remain extremely affordable, making this artist exceptionally attractive to art investors looking for the next big thing.
These artists already have a reputation in the art world and their works are already being sold at auction. They may be on their way to becoming household names, they will have ample press coverage and their works can be found hanging in both public galleries and private collections. Usually the key works of an established artist offer exceptional investment opportunities and they are likely to appreciate value more quickly than works by emerging artists.
An Established Artist – Case Study: Bansky
Banksy’s “Girl With Balloon” which initially sold for £250 when the artist first started to attract the attention of the art world was re-sold in 2018 at Sotheby’s for £1 million. The art work has risen in value by an average of 18% over the past five years, while signed prints of the same piece have risen by 25% on average since 2013.
Banksy’s origins as a much-admired but mysterious street artist quickly caught the eye of galleries with the first exhibition of his work held in 2002 at the 33 1/3 Gallery in Los Angeles. Following this his work started selling at auction, often without his permission or approval, and soon commanded significant prices and attracted interest from celebrities like Brad Pitt and Angelina Jolie, fellow artist Damien Hirst, and Kate Moss.
This remarkable track record makes Banksy a very attractive prospect for investors and has also had the side effect of boosting the profile of street art on the investment market.
Blue-Chip artists have a reputation which extends beyond the art world into the public realm and they are regarded as household names. International collections and national galleries display their works and their key pieces regularly fetch six or seven figure amounts at auction. The advantage of this category is that works by these artists tend to be easy to sell, but they may not offer the exceptional returns which are possible with work by emerging or established artists.
A Blue Chip Artist – Case Study: Andy Warhol
Andy Warhol who has dominated the art world for over fifty years and left an indelible mark on how the market is perceived. Today Warhol is the world’s top-selling artist with total sales of $4.96 billion across 18554 lots. Recent highlights include the sale of “Sixty Last Suppers”, the largest of his works ever auctioned, for $60.8 million in 2017, while
“Silver Car Crash (Double Disaster)” sold for a record $105.4 million at Sotheby’s in 2013.
Despite the high prices achieved by Warhol’s more famous works, there is still ample investment potential to be found in more affordable pieces. For example, a Marilyn Monroe silkscreen print fetched £21,000 at Sotheby’s New York in 2002 and was resold in 2014 for an impressive £158,000 at Christies London.
Any successful investor knows that it pays to have explored and scoped out potential exit strategies ahead of making an investment.
Primarily used for established or blue-chip artists who already have a significant body of work on the secondary market, auction houses can be an excellent way of cashing in on your investment when the time is right. It is important to keep in mind auction house fees, though, which can amount to up to 25% of the final hammer price.
An excellent alternative to auction house sales is marketing artwork in our gallery space itself.
Another option is to market works to investors or collectors who are looking for particular works. The benefit of this strategy is that owners of artwork which is in very high demand can receive exceptional returns
The online art market is currently booming and many new and often investment-backed online platforms are coming to market. SEE OUR ANALYSIS HERE:
Looking for something a little less subjective than art as an investment?
Some Alternative Investments that meet the criteria you may be looking for:
- To protect your wealth.
- To diversify your portfolio.
- To hedge against volatility and inflation.
- To increase your tax efficiency.
- Gain yeild.