The Fine Art of Investing in Fine Art
s an investment, art is growing in acceptance and prevalence. Historically, it has proven to perform better than other asset classes, especially in downturns. Studies by Barclays Capital and The Economist (in 2003 and 2005) showed that art outperformed both equities and property over both short and long periods of time.
But, like wine or stamps, art has always been considered an ‘alternative’ asset. It can be as volatile as the stock market, cannot be easily liquidated and is at its best as a long-term buy, as the last year has — painfully — shown. And, well, it’s art. It’s difficult to put numbers to it.
|
|
|
Image: Vikas Khot
|
|
Deepak Shahdapuri, art collector and board member of SaffronArt | |
Milind Sathe, founder-director of Indiaart.com, puts it succinctly: “In a world where you monitor companies and stocks on an hourly basis, well, that does not happen in art. There are no indices on artists.”
As a result, there’s a ferocious amount of pure BS floating around in the art market. So, yes, the downturn means it’s a buyer’s market, and a good time to buy art, but how the heck do you figure out all the nebulous claims and insider jargon?
The Numbers Game
What are the numbers art does give us? When the downturn hit, gallery sales of top contemporary artists were down by up to 50 percent.
Yet the figure for contemporaries has already returned to about 30-35 percent of original retail values of 2007 and 2008, says Sharmistha Ray, director of Bodhi Art Gallery, Mumbai. But wait, Ray cautions: “These are not scientific figures, they are based on a loose average of gallery sales.”
Other unscientific pulse-readers: The Indian Art Market Confidence Indicator by London-based ArtTactic dropped 23 percent from May to October 2008. And since then it’s gotten worse. Art funds that are soon maturing are scared to liquidate. Average auction prices are down too.
Is it all terrible? We can take some comfort in knowing that the seller always expects the best price, that expectations are always higher than the market. “Expectations are built overnight,” says Ray, “but take a long time to dismantle.”
It’s all about perception. Like the Sensex, art market values plummeted due to falling expectations. They are already going back up as perceptions improve. Sotheby’s auction of impressionist and modern art raised $55.1 million at the end of June, well within pre-sale estimates. It’s not all rosy yet, but try to think long term.
The Recession Is Your Friend
Very belatedly, artists are now negotiating prices. Like real estate or oil, art is getting healthier with much-needed price corrections. Aditi Khurana, former Senior Manager of Palette Art Gallery in Delhi and current project head of the arts initiative ‘Contemplate,’ says the boom meant people stopped differentiating between good and bad art, which is correcting itself now.
And the art itself will get better. Khurana says, “When demand was high, artists were producing works at a fast pace, and it affected the quality of their work. In a way, the slowdown is the best thing. Now there is sanity, correction, and maturity.”
Business ethics should also improve. Khurana thinks the art market is becoming Darwinian: Only the best artists will survive.
Beware of Contemporary Art
The bubble has burst. And about time too. Contemporary paintings that were being sold for the price of a Mumbai suburban flat — plus your kids’ education abroad — are now going for much cheaper.
Take contemporary artist Anju Dodiya. In 2000, she was selling at Rs. 1 lakh through galleries. She sold the same kind of work in 2007 for Rs. 50 lakh! And now, prices for her pieces have fallen 30 percent, back to rational levels.
ArtTactic estimated in June that the average auction price of all contemporary art saw a 76.2 percent fall. Contemporary art followed the shape of the sub-prime market. Up breathtakingly fast. Then back down again to sensible levels.
Deepak Shahdadpuri, art collector and board member of SaffronArt, gives a more famous example: Subodh Gupta. The man’s art work took the same rollercoaster as Dodiya (though to even higher levels). Currently, his art is selling at prices between $150,000–$200,000, 85 percent below their peak, and a much more sane level than the boom time.
“But at least his works are selling,” Shahdadpuri says. “Many other artists who rose during the boom have no buyers today at any price.” He attributes the fall not only to inflated prices, but also to the difficulty of assessing how artists with little track record will develop over time.
In early July, a series of auctions at Christie’s and Sotheby’s saw old master paintings outperform the summer’s impressionist, modern and contemporary sales for the first time in several years. Perhaps it’s time to go back to the ancients.
Single Page View
Take a look at this blog that writes about indian art as an investment. Its a good read
Thomas
http://investindianart.blogspot.com
