Art as InvestmentJune 22, 2020
Stories abound of huge price-tags following great art. The question arises - ‘How do I get some of that?’
So this is a comment on that scenario from the artist’s point of view.
I follow all sorts of sources on news in the art world as I like to see what is going on. I also visit a lot of places where artists are trying to sell their work and I think I am in a reasonable position to compare and contrast - what is ‘it’ that makes this painting worth millions, while that one doesn’t sell at all?
The intrinsic quality of the painting itself is a kind of ‘entry-level’ standard - it must look like the real thing. But there are literally thousands of such paintings available from online galleries, some on eBay for $1, and (as with so much) some that look to be of high quality produced in China, and some that are seriously good available from Art Fairs ….. but it is highly doubtful if any of those will command significant prices at any time in the future.
The artist’s NAME is the ‘brand’.
And some names command big money - Banksy, on a trip to New York, put little sketches up for sale for a few dollars, knowing that the lucky buyers - if they wanted to cash in - could sell them for a lot more.
One of my subjects at university was economics, albeit at the most basic level, but I can recall various graphs which set out the principles of pricing, called supply and demand curves. As I recall, if you start with a level field of various very similar products, manufactured to similar standards of quality and having similar standards of functionality, why is it that people will pay more for some than for others?
- It is all about consumer confidence in the brand.
The car market is the easiest example today - there are cars made in far-away countries which probably use many of the same component parts as the so-called ‘western’ makes, and which certainly have as many if not more bells and whistles than those competitors, and yet we will only pay a fraction of the price for them ….. because we have more confidence in our chosen brand.
Of course an art investment has an even longer life than a new car - if you sink a load of your money into a painting, when do you expect any kind of return?
But here we have to jump, because cars and paintings are - for most people - entirely different markets, with different factors influencing the buying decision.
Most people buy their art firstly because they like the work and can envisage it decorating their place for years ahead, and so for them, any potential growth in value is almost a bonus …. except (back to the car story) - we like to feel good about the vehicle sitting outside the house / we like to feel good about the painting on the wall.
It’s a funny business keeping up appearances, but we all do it.
And with the art on your wall, you will feel better if you can tell your guests something about it, which will include something about the artist.
But back to the subject of investment in art - there are firms which specialise in providing ‘investment art’. Much of their material is detailed info about the artist, setting out the story as to why this person’s work is likely to grow in value in the years ahead - this is designed to give the buyers those stories to drop in to the folks who admire the piece on the wall.
Many of the examples, the success stories that those organisations use, relate to people who bought a painting (or other artwork) before the artist hit the big time, and show that what was bought for hundreds now sells for thousands.
As an aside here, this is where I show some anger - why do people pay more for a fairly ordinary piece of art because it is painted by someone who once was a famous rock star / football player / ….. ? - and I answer my own question, just because the new owner can say ’ Oh yes, that was painted by …x.’
Another angle - wandering around galleries, I noticed that many include a note of the birth year of any living artist. It took a while, but eventually I realised that this is more about my supply and demand curves - once a person is dead, they will not produce any more art and so it is possible that demand will outstrip supply and hence the price will rise!
My observation on that theory is that it is also possible that the person’s name and brand will die with them, and the painting will be worthless. Just look into junk shops or flea markets and you will always find some art which somebody once paid for.
There are, of course, some likely winners - remember the old story - ‘the rich get richer’?
If you can afford to buy something by someone who is already established as a ‘star’ (painter, not guitarist!), it is likely that their work will appreciate - but - the warning - investments can go down - fashion in this market is just as fickle as any other. Will the ‘cutting edge’ artists of today be more popular in 20 years time?
Works by someone in demand today might not last. Just look at what was top of the pops thirty years ago.
So - two ways to go about it - (1) Go to the absolute limit of what you can afford and buy an original artwork by someone who is clearly in demand, or (2) choose a painting that you really really like and enjoy it while you can.