The business of investing in art for financial return is a notoriously tricky one. While many people contend — with some justification — that art is not an investment asset class in the same way as stocks or bonds are, it is also possible to view the art market as a financial instrument, and trade in art as an investment asset.
Artprice reported recently that the global auction turnover on fine art rose 18% in the six months to June 2018, totalling $8.45-billion. The market grew on all continents, with a massive 48% increase in turnover in the US, to $3.3-billion. The other major markets followed suit, with $2-billion in turnover in China, which is a relatively isolated market, and turnover up 18% in the UK, to $1.9-billion.
A note of caution should be sounded about this growth from an investment viewpoint, however. A whopping 46% of this turnover growth is accounted for by the modern-art segment, and was led by works by Picasso and Modigliani, both scoring results of more than $100-million for globally dominant auction house Sotheby’s. The performance of such flagship works at auction can artificially skew the picture of what is happening in the market at a deeper level.
For one thing, these eight- and nine-figure prices are only really possible for works consigned by museums or large art institutions, although there is a small elite of high-net-worth individuals who compete to acquire these rare works at auction.
While much rides on the performance of these works at auction, it also detracts from the fact that healthy growth exists at lower price points, which in turn points to resilience in the market for investing in art.
The attractive returns on art over the last few years have outperformed many other investments, and the art market has become an independent, liquid, and efficient market on all continents. Along the way, it has resisted the fallout from global crises such as 9/11 and the financial crash of 2007-8, proving its resilience. The consistent growth in the art market over the past 20 years has also been fuelled by other factors. There has been a rapid increase in the art-buying population from about 500,000 after 1945 to about 90-million in 2018; there has also been a significant reduction in the average age of market players, including buyers, as well as a major geographical expansion of the market to nearly all of Asia, the Pacific Rim, India, Africa, the Middle East, and South America.
As Artprice also points out, another massive market driver is the way in which the museum industry has changed. More museums opened between 2000 and 2014 than in the previous two centuries — about 700 new museums a year. The same process has been taking place in South Africa — obviously on a much smaller scale — with the recent opening of the Zeitz Museum of Contemporary Art Africa and the Norval foundation in the Cape, and the impending opening of the Javett Art Centre at the University of Pretoria.
While it is too early to tell in the South African market, we might expect the same effect as has been the case worldwide — that the hunger of museums for top-quality works will be a driver of growth.
Globally, the average value of artworks in the historic, modern, and contemporary segments has averaged a 25% increase in the six months to June 2018. The contemporary segment on its own has averaged an 88% increase. This does not only refer to “star” artists, since there has been an average annual yield of +9% on works for more than $20,000.
In the South African market there have been similarly spectacular performances for better-known signatures. A world record of R1,932,560 was realised for Mythological Rider, 1970, by Sydney Kumalo, and a South African record price of R5,456,640 was fetched for a William Kentridge drawing, Drawing from Mine (Soho with coffee plunger and cup), 1991, both in November last year.
Another rare and significant Kentridge also features on an upcoming auction in October, which is another of the drawings for projection, Drawing from Stereoscope (Double page, Soho in two rooms), 1999. The auction company concerned will hope to capitalise on Kentridge’s stellar profile in the wake of his critically acclaimed performances of The Head and the Load at the Tate in London this year.
- From the September edition of Wanted magazine.