Money
Central: Ten lessons from war that apply to investing
Contemporary art can tick all the right boxes for an alternative investment.
Buying wisely means that you will not only have a nice feature above your
fireplace, but a potential heirloom.
Prices in the contemporary art market are moving fast, with the cost of works
by artists such as Banksy and Jack Vettriano increasing exponentially in
recent years.
The problems for the uninitiated are cost and knowing what to buy. While a £50
million diamond-encrusted skull by Damien Hirst is likely to be a touch
pricey for most amateur collectors, it is possible to pick up work by
well-respected artists for about £100.
The Arts Council and galleries across the UK run initiatives to encourage
low-cost ownership of art, including interest-free loans and courses for
amateurs who cannot tell apart the Chapmans from the Emins.
The idea is to help to fund artists, as well as to make art more available to
the masses.
The Arts Council scheme, Own Art, is available through galleries in England
and Scotland and offers interest-free loans for up to £2,000, repayable over
ten months. The Whitechapel, a contemporary art gallery in East London,
offers limited-edition artworks by artists such as Antony Gormley and Anish
Kapoor for as little as £88. Rachel Mapplebeck, of the Whitechapel, says:
“We aim to demystify collecting and make it accessible. The reason we are
able to offer low-cost work by amazing artists is the high print runs.”
Going online to buy can be even more rewarding. Contemporary art websites,
such as www.artsource.org, offer art at prices about 20 per cent to 30 per
cent lower than those at traditional galleries because the cost does not
have to cover expensive rent overheads or commission.
Colin Mansell, creative director of the Artsource, the online art marketing
agency, says: “Real-world galleries pay high rent on square footage, leading
to artificially inflated values. And as with the property market, prices
have been pushed up further by commission on sales.”
As an investment, contemporary art can be risky. You are banking on the artist
becoming a celebrity and the market can be cyclical, depending on prevailing
economical conditions. Charles Dupplin, head of art and private clients at
Hiscox, the insurer, says: “The art market is full of fast money. For
instance, the value of a Banksy print today is a lot higher than it was a
year ago and much, much higher than it was five years ago because of the
name.”
Choosing which art to buy can be difficult, because the value can be very
subjective and dependent on trends. Mr Mansell says: “Contemporary art is a
bit like the emperor’s new clothes: it is worth whatever anyone is willing
to pay. It is highly subjective and there is no fixed formula for success.”
Ironically, the best way to invest in art is not to consider it as an
investment, says Catherine Petitgas, a collector who specialises in Latin
America. “I never buy to resell,” she says. “The value is somewhat virtual;
you do not anticipate realising it. You build the collection because it is
pleasurable. The investment is in the career of the artist.”
However, because the value of art is so subjective, it is easy to be ripped
off. Ms Petitgas says that you can check that you are paying the right price
by looking at the prices fetched at auction by similar works and by checking
online.
Mr Mansell adds that personal taste should be your guide with purchases worth
less than £1,000. “The No 1 rule is to buy it because you love it,” he says.
But for anyone buying more expensive pieces, Mr Mansell recommends doing your
research and heading down to the end-of-year shows at famous art schools,
such as the Chelsea College of Art & Design. These are usually held at
the beginning of the summer. “If you are taking an investor’s approach, then
it is a good idea to target new graduates as they are seen as the next big
things,” Mr Mansell says.
Ms Petitgas, meanwhile, cautions against buying on impulse. Instead, your
purchase should be based on interest and knowledge. She says: “A budget of
£2,000 could fetch an early piece by an art graduate which could rise to
£10,000 the next year. The key is to spot those who are just ahead of a
trend. You can do this by fluke, but to do it consistently you need to be
well informed.”
For budding art investors, the web-site www.arttactic.com tracks movements in
the art market and has information on the latest auctions and which works
and artists are in demand. For information on artists, exhibitions and
galleries, go to www. artfacts.net.
The Scottish Arts Council recommends that novice collectors reduce the risk
either by buying a piece by someone who is already well known, or by buying
several works by lesser-known artists. But for those who want to dip into
the art world without second-guessing future price rises, the low-cost
schemes offer a kick start.
Ms Stack says: “Own Art is an introductory scheme; it is not about putting
investors in touch with rising stars in the art world, but about building
confidence and developing your own eye. What we offer is a huge choice of
artwork.”
Some galleries run courses on buying art. The Whitechapel, for instance, has a
course on collecting contemporary art. The course, which costs £595, offers
tours around the homes of international collectors, a visit to an auction
and meetings with artists in their studios.
Ms Applebeck says: “It is not only City boys getting big bonuses who sign up.
There is a whole range of people, many of whom are simply interested in
art.”
Don’t underestimate the importance of an up-to-date valuation
In April 2004 The Singing Butler, painted by Jack Vettriano, sold at
Sotheby’s for £744,800, having been bought for a mere £3,000 in 1991. The
moral of the story? If you have any contemporary art that cost you next to
nothing years ago, have it valued. If you do not want to sell it, you will
certainly need to insure it.
Most standard household policies cover individual items up to £1,000, which is
unlikely to be enough for an early piece by Banksy, the graffiti artist, of
which there are thousands in living rooms across the country.
For a valuation, contact an auction house, such as Christie’s and Sotheby’s,
or approach a reputable local dealer. Auction houses usually charge for a
valuation, but not if you intend to sell the piece through them. Specialist
insurers can often help to establish a value.
Charles Dupplin, of Hiscox, the insurer, says that a £3,000 work by Banksy
would cost about £30 a year to insure by itself. To insure a collection
worth £100,000 the cost would be about £300 a year on top of your standard
household premium.
However, Mr Dupplin warns amateur collectors that specialist insurance can be
invalidated if the art is not cared for correctly. “Contemporary art can be
very fragile,” he says. “In some cases it must not be exposed to direct
sunlight and must be packaged and moved correctly. But most insurers will
advise on this.”
