Art as an investment (Love what you buy)
Please note: Nothing in this article should be considered financial advice. Please contact your financial planner for personal financial advice.
Is art a good investment choice? Well, it is a good question about a broad subject. There are many things to consider and in this blog we will talk about general art collecting in the UK. So we will be discounting the Ultra high net worth’s (approx. £30M+ in investable assets) and the high net worth individuals (approx. £1M+ in investable assets) and their collecting choices.
In this article, we are looking at the art (paintings) market below the £10,000 mark and whilst it makes for a good Sunday newspaper headline about the celebrity that bought a painting at £1M and sold it for £2.2M; it does not help or inform the majority of us ‘art loving Brits’ that don’t have trust funds or platinum record deals.
Art as an investment; benchmarking
It is always good to have a benchmark to measure & compare investments against, so here are a few to consider your art investments against.
Inflation over 25 years:- According to the Bank of England calculator, £1,000 in Sept 1998 is equivalent to £1,854.79 today (Link: Inflation calculator | Bank of England)
The LSE FTSE 100 over 20 years:- Oct 1st 2003 the FTSE 100 was at 4,287 and on Oct 1st 2023 was at 7,515, giving an increase of 75.3% according to Investing.com (Link: Stock Market Analysis & Opinion - Investing.com UK)
Gold Bullion over 20 years:- According to Gold.co.uk on Oct 3rd 2003 gold was at £230 per Ounce and on 3rd Oct 2023 it was £1,510 per Ounce, a 556% increase. (Link: Gold Price - Live Gold Price Chart | GOLD.co.uk)
Compounding: - You can also use the rough rule of a 7.2% gain per year re-invested will double your investment in ten years, therefore £1,000 increasing by 7.2% with interest re-invested will give you £2,050 in ten years. My personal favourite measurement as it is easy to remember.
Is art a good investment? Dividends and interest payments
An important point regarding art as an investment is that paintings don’t pay out dividends or interest. So any increase (if there is one) must be reflected in the paintings sale price at the end of the holding. Other costs that should be considered with owning paintings include: buying fees, storage fees, restoration & framing costs, and the potential resale fees.
Which art to invest in, contemporary art, more traditional art or a future asset?
If you type art as an investment into Google, you will find many options for buying a contemporary artwork for a hopeful ‘later date’ profit. The question is, will the next generation in 10/15/20 years’ time desire or value the same artworks as us? (There is never a guarantee.)
Personal choice plays a large part in trying to guess future demand, and it can be difficult to predict trends. A particular style of contemporary art or artist may no longer be in fashion or favour in 5 years’ time, so there are no guarantees of future demand or value; and the same goes for more traditional paintings too. This was brought home to me at a recent auction where an auctioneer was trying to get a reasonable quality painting ‘off the block’ with no maiden bids or internet interest; after falling from £400 to £50 he still couldn’t get an initial bite. This was followed by his desperate and somewhat deflated comment “oh come on, it’s not a Dutch windmill scene” which created smirks & giggles around the room. This highlights your problem with painting investment choices, they need to have a timeless or broad appeal if you are going to hold them for many years. It should also be a collectable artist with the likelihood of a good future collector base. Time to get the crystal ball out!
When Artsy (Artsy — Discover, Buy, and Sell Fine Art) the global art sales platform asked the question “Why do you buy art?” in a recent 2023 survey, 38% of the 1200 respondents said “To make an investment” and that figure is rising, so you are not alone in this pursuit of finding an investment piece.
Art as an investment worldwide, home or abroad?
We specialise mostly in British paintings at Rastall Art with a few European flashes of colour to keep things interesting; but I recently visited one of my sons on the outskirts of London, who was incredibly pleased with his recent purchase of several communist propaganda art posters. He asked, “What do you think dad?” and I will be honest, I stumbled to find a family appropriate answer.
Whilst I am not sure I want to sit and look at a blood red Lenin striving for communist utopia, he continued to explain that they are informative, historic, artistic, cultural and had a worldwide appeal. Although not a painting, he was correct and had thought about future demand and interest with a worldwide audience online. For example, a good simple watercolour of Bodmin Moor is unlikely to bag a huge profit in 15 years’ time as it’s World appeal may be limited. So you may want to consider the question of investing for a home or abroad marketplace, which may mean separating between buying with the heart or using a more detached investor approach.
What Art to invest in? Quality first and foremost!
The best art investment results come from the best quality examples of an artist’s work, but please remember, tastes may change over time. The secondary works could be cheaper now; but could appreciate as more collectors join in the hunt for good examples (creating a growing marketplace).
We would all like to own the very best paintings, but that may not be possible as museums or wealthy collectors may have beaten us to it. However, like stamp or coin collecting, you usually get the best payback from owning a fine quality piece (investment grade?) and bargains are not always what they seem from an investment point of view.
As a personal preference, we would rather own one exceptional piece of art at £8,000 than two good pieces at £4,000; however, you can trade up as your collection grows and their values appreciate over time. Good provenance will also help the painting over time, so collect as much information about the provenance as you can at the time of purchase.
Our recommendation is that you invest in art you are passionate about. If it all goes wrong you will still love it.
If every search for a painting starts with the passion to own the best painting and a heartfelt desire to collect that artist, you cannot really go wrong. If you love it now, you will probably love it in the future and price becomes less important.
In our view, this is how art should be collected, with passion first, but we have written this article as we get asked so many times “Do you think it is a good investment?”.
At this point I will direct you to a book written by Melanie Gerlis – Titled: Art as an Investment; A Survey of Comparative Assets published by Lund Humphries (2014). (Available at all good bookstores.) This is a well-researched 170+ page book by a competent and informed writer that I have read a few times. I can’t help but go back to page 15 under the heading Is art a good investment? where (for me) Melanie Gerlis distils the whole book into a few lines as follows:
“Most analyses of the art market to date concentrate on the relative returns, almost regardless of risk. All available research on the broad market suggests the average compound return of all segments of investment grade art, taken together and held for between 5 and ten years is around 4%. Relatively speaking, this is pretty low – it is considerably less than for gold, wine, and both public and private equity.”
Did you read the 4% return bit?
In her book Melanie Gerlis was looking at world class pieces of art from big collections and the premium auction house sales. That does not mean that opportunities are not available at your local auction house or even gallery. You may think that a gallery or art show will be charging more and the bargains are all at the auctions; but we recently picked up a signed picture for 1/3rd of the auction price at a gallery with a very good pedigree on the Cotswolds. It does not happen very often, but it does happen. We intend to keep that picture as Tracy loves it, but have already had interest from a dealer in London.
Still want to invest in British art? Here are few real-life examples (good and bad)
Ken Howard (1932 - 2022) Historic Median Artwork Prices (Source: MutualArt.com)
Alan Davie (1920 - 2014) Historic Median Artwork Prices (Source: MutualArt.com)
Some personal examples of art we have purchased and that we enjoy having in our offices.
Fred Yates (1922 - 2008) |
Harbour Scene (possibly Looe, Cornwall)
Passed @ auction 2014 (est £1,200 - £1,400)
Purchased privately in Europe 2015 £750
Our Autumn 2023 estimate £3,500/£4,500
David Barnes (1942 – 2021) |
Storm over Rhinogs
Sold @ Auction £450 2017
Our Autumn 2023 estimate £1400
So how do you start investing in art?
Don’t just jump in and please don’t invest all your savings in art! Read and research the market you want to invest in online and in person at shows, galleries, and auctions.
Drawings, watercolours, oils, pastels and charcoal all have their attractions and don’t underestimate the up-and-coming artists, although that area is harder to read as their track record will be shorter.
Try to find artists you like and watch their works for a period to see what the market values their works at. If you see several paintings over a few months and can correctly guess the prices, you are getting close to knowing what the market will pay for those pieces; which is crucial information for your buying strategy.
If you buy well and hold good art for a period you may get a much better result than paying too much at the start. Remember, you will make some mistakes investing in art, we did, and we continue to learn; but eventually you will become more confident, informed, and will know when an artwork looks like a good buy.
Watch the auctions, watch out for fakes & forgeries, don’t discount the galleries or art shows and keep learning.
Build up a relationship with a dealer you trust and explain what you are looking for, like Rastall Art, they may just have a painting that is tucked away or in their off market private collection that is ideal for your investment plan.
Trust plays a large part in art as an investment, so remember to ask questions, listen to the answers, and dip your toe in slowly.